G.R. No.

80447 January 31, 1989

BALIWAG TRANSIT, INC., petitioner,

vs.
HON. COURT OF APPEALS and SPS. SOTERO CAILIPAN, JR. and ZENAIDA LOPEZ and
GEORGE L. CAILIPAN, respondents.

Sta. Maria & Associates for petitioner.

Punzalan and Associates Law Office for respondents.

MELENCIO-HERRERA, J.:

On 10 April 1985 a Complaint for damages arising from breach of contract of carriage was filed by
private respondents, the Spouses Sotero Cailipan, Jr. and Zenaida Lopez, and their son George, of
legal age, against petitioner Baliwag Transit (Baliwag, for brevity). The Complaint alleged that
George, who was a paying passenger on a Baliwag bus on 17 December 1984, suffered multiple
serious physical injuries when he was thrown off said bus driven in a careless and negligent manner
by Leonardo Cruz, the authorized bus driver, along Barangay Patubig, Marilao, Bulacan. As a result,
he was confined in the hospital for treatment, incurring medical expenses, which were borne by his
parents, the respondent Spouses, in the sum of about P200,000.00 plus other incidental expenses
of about P10,000.00.

On 26 April 1985 an Answer was filed by petitioner alleging that the cause of the injuries sustained
by George was solely attributable to his own voluntary act in that, without warning and provocation,
he suddenly stood up from his seat and headed for the door of the bus as if in a daze, opened it and
jumped off while said bus was in motion, in spite of the protestations by the driver and without the
knowledge of the conductor.

Baliwag then filed a Third-Party Complaint against Fortune Insurance & Surety Company, Inc., on its
third-party liability insurance in the amount of P50,000.00. In its Answer, Fortune Insurance claimed
limited liability, the coverage being subject to a Schedule of Indemnities forming part of the
insurance policy.

On 14 November 1985 and 18 November 1985, respectively, Fortune Insurance and Baliwag each
filed Motions to Dismiss on the ground that George, in consideration of the sum of P8,020.50 had
executed a "Release of Claims" dated 16 May 1985. These Motions were denied by the Trial Court
in an Order dated 13 January 1986 as they were filed beyond the time for pleading and after the
Answer were already filed.

On 5 February 1986 Baliwag filed a Motion to Admit Amended Answer, which was granted by the
Trial Court. The Amended Answer incorporated the affirmative defense in the Motion to Dismiss to
the effect that on 16 May 1985, George bad been paid all his claims for damages arising from the
incident subject matter of the complaint when he executed the following "Release of Claims":

For and in consideration of the payment to me/us of the sum of EIGHT THOUSAND
TWENTY and 50/100 PESOS ONLY (P8,020.50), the receipt of which is hereby
acknowledged, I/we, being of lawful age, do hereby release, acquit and forever
discharge Fortune Insurance and/or Baliwag transit, Inc. his/her heirs, executors and
 assigns, from any and all liability now accrued or hereafter to accrue on account of
any and all claims or causes of action which I/we now or may here after have for
personal injuries, damage to property, loss of services, medical expenses, losses or
damages of any and every kind or nature whatsoever, now known or what may
hereafter develop by me/us sustained or received on or about 17th day of December,
1984 through Reckless Imprudence Resulting to Physical Injuries, and I/we hereby
declare that I/we fully understand the terms of this settlement and voluntarily accept
said sum for the purpose of making a full and final compromise adjustment and
settlement of the injuries and damages, expenses and inconvenience above
mentioned. (Rollo, p. 11)

During the preliminary hearing on the aforementioned affirmative defense, Baliwag waived the
presentation of testimonial evidence and instead offered as its Exhibit "1" the "Release of Claims"
signed by George and witnessed by his brother Benjamin L. Cailipan, a licensed engineer.

By way of opposition to petitioner's affirmative defense, respondent Sotero Cailipan, Jr. testified that
be is the father of George, who at the time of the incident was a student, living with his parents and
totally dependent on them for their support; that the expenses for his hospitalization were shouldered
by his parents; and that they had not signed the "Release of Claims."

In an Order dated 29 August 1986, the Regional Trial Court of Bulacan, Branch 20, 1 dismissed the
Complaint and Third-party Complaint, ruling that since the contract of carriage is between Baliwag
and George L. Cailipan, the latter, who is of legal age, had the exclusive right to execute the
Release of Claims despite the fact that he is still a student and dependent on his parents for support.
Consequently, the execution by George of the Release of Claims discharges Baliwag and Fortune
Insurance.

Aggrieved, the Spouses appealed to respondent Court of Appeals.

On 22 October 1987, the Appellate Court rendered a Decision 2 setting aside the appealed Order
and holding that the "Release of Claims" cannot operate as a valid ground for the dismissal of the
case because it does not have the conformity of all the parties, particularly George's parents, who
have a substantial interest in the case as they stand to be prejudiced by the judgment because they
spent a sizeable amount for the medical bills of their son; that the Release of Claims was secured by
Fortune Insurance for the consideration of P8,020.50 as the full and final settlement of its liability
under the insurance policy and not for the purpose of releasing Baliwag from its liability as a carrier
in this suit for breach of contract. The Appellate Court also ordered the remand of the case to the
lower Court for trial on the merits and for George to return the amount of P8,020.50 to Fortune
Insurance.

Hence, this Petition for Review on certiorari by Baliwag assailing the Appellate Court judgment.

The issue brought to the fore is the legal effect of the Release of Claims executed by George during
the pendency of this case.

We hold that since the suit is one for breach of contract of carriage, the Release of Claims executed
by him, as the injured party, discharging Fortune Insurance and Baliwag from any and all liability is
valid. He was then of legal age, a graduating student of Agricultural Engineering, and had the
capacity to do acts with legal effect (Article 37 in relation to Article 402, Civil Code). Thus, he could
sue and be sued even without the assistance of his parents.
Significantly, the contract of carriage was actually between George, as the paying passenger, and
Baliwag, as the common carrier. As such carrier, Baliwag was bound to carry its passengers safely
as far as human care and foresight could provide, and is liable for injuries to them through the
negligence or wilful acts of its employees (Articles 1755 and 1759, Civil Code). Thus, George had
the right to be safely brought to his destination and Baliwag had the correlative obligation to do so.
Since a contract may be violated only by the parties thereto, as against each other, in an action upon
that contract, the real parties in interest, either as plaintiff or as defendant, must be parties to said
contract (Marimperio Compania Naviera, S.A. vs. Court of Appeals, No. L-40234, December 14,
1987, 156 SCRA 368). A real party-in-interest -plaintiff is one who has a legal right while a real party-
in-interest-defendant is one who has a correlative legal obligation whose act or omission violates the
legal right of the former (Lee vs. Romillo, Jr., G.R. No. 60973, May 28, 1988). In the absence of any
contract of carriage between Baliwag and George's parents, the latter are not real parties-in-interest
in an action for breach of that contract.

The general rule of the common law is that every action must be brought in the name
of the party whose legal right has been invaded or infringed. 15 Enc. P1. & Pr. p.
484. "For the immediate wrong and damage the person injured is the only one who
can maintain the action." Id. p. 578. The person who sustains an injury is the person
to bring an action for the injury against the wrongdoer." Dicey parties to Actions, 347.
(Cited in Green v. Shoemaker, 73 A 688, 23 L.R.A., N.S. 667).

There is no question regarding the genuineness and due execution of the Release of Claims. It is a
duly notarized public document. It clearly stipulates that the consideration of P8,020.50 received by
George was "to release and forever discharge Fortune Insurance and/or Baliwag from any and all
liabilities now accrued or to accrue on account of any and all claims or causes of action ... for
personal injuries, damage to property, loss of services, medical expenses, losses or damages of any
and every kind or nature whatsoever, sustained by him on 17 December 1984 thru Reckless
Imprudence Resulting to Physical Injuries." Consequently, the ruling of respondent Appellate Court
that the "Release of Claims" was intended only as the full and final settlement of a third-party liability
for bodily injury claim and not for the purpose of releasing Baliwag from its liability, if any, in a breach
of a contract of carriage, has to be rejected for being contrary to the very terms thereof. If the terms
of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal
meaning of its stipulations shall control (Article 1370, Civil Code). The phraseology "any and all
claims or causes of action" is broad enough to include all damages that may accrue to the injured
party arising from the unfortunate accident.

The Release of Claims had the effect of a compromise agreement since it was entered into for the
purpose of making a full and final compromise adjustment and settlement of the cause of action
involved. A compromise is a contract whereby the parties, by making reciprocal concessions, avoid
a litigation or put an end to one already commenced (Article 2028, Civil Code). The Release of
Claims executed by the injured party himself wrote finish to this litigation.

WHEREFORE, the Decision dated 22 October 1987 of respondent Court of Appeals is SET ASIDE,
the Decision of the Regional Trial Court of Bulacan, Branch 20, is REINSTATED, and the Complaint
and Third-Party Complaint are hereby ordered DISMISSED. No costs.

SO ORDERED.

Paras, Padilla, Sarmiento and Regalado, JJ., concur.

Footnotes

1 Name of Presiding Judge not stated.

2 Fifteenth Division, composed of Justice Bienvenido C. Ejercito, Chairman -

Ponente, Justices Segundino G. Chua and Nicolas P. Lapena, Jr., Members.
G.R. No. 92288 February 9, 1993

BRITISH AIRWAYS, INC., petitioner,

vs.
THE HON. COURT OF APPEALS, Twelfth Division, and FIRST INTERNATIONAL TRADING
AND GENERAL SERVICES, respondents.

Quasha, Asperilla, Ancheta, Peña & Nolasco for petitioner.

Monina P. Lee for private respondent.

NOCON, J.:

This is a petition for review on certiorari to annul and set aside the decision dated November 15,
1989 of the Court of Appeals1 affirming the decision of the trial court2 in ordering petitioner British
Airways, Inc. to pay private respondent First International Trading and General Services actual
damages, moral damages, corrective or exemplary damages, attorney's fees and the costs as well
as the Resolution dated February 15, 19903 denying petitioner's Motion for Reconsideration in the
appealed decision.

It appears on record that on February 15, 1981, private respondent First International Trading and
General Services Co., a duly licensed domestic recruitment and placement agency, received a telex
message from its principal ROLACO Engineering and Contracting Services in Jeddah, Saudi Arabia
to recruit Filipino contract workers in behalf of said principal.4

During the early part of March 1981, said principal paid to the Jeddah branch of petitioner British
Airways, Inc. airfare tickets for 93 contract workers with specific instruction to transport said workers
to Jeddah on or before March 30, 1981.

As soon as petitioner received a prepaid ticket advice from its Jeddah branch to transport the 93
workers, private respondent was immediately informed by petitioner that its principal had forwarded
93 prepaid tickets. Thereafter, private respondent instructed its travel agent, ADB Travel and Tours.
Inc., to book the 93 workers with petitioner but the latter failed to fly said workers, thereby compelling
private respondent to borrow money in the amount of P304,416.00 in order to purchase airline
tickets from the other airlines as evidenced by the cash vouchers (Exhibits "B", "C" and "C-1 to C-7")
for the 93 workers it had recruited who must leave immediately since the visas of said workers are
valid only for 45 days and the Bureau of Employment Services mandates that contract workers must
be sent to the job site within a period of 30 days.

Sometime in the first week of June, 1981, private respondent was again informed by the petitioner
that it had received a prepaid ticket advice from its Jeddah branch for the transportation of 27
contract workers. Immediatety, private respondent instructed its travel agent to book the 27 contract
workers with the petitioner but the latter was only able to book and confirm 16 seats on its June 9,
1981 flight. However, on the date of the scheduled flight only 9 workers were able to board said flight
while the remaining 7 workers were rebooked to June 30, 1981 which bookings were again
cancelled by the petitioner without any prior notice to either private respondent or the workers.
Thereafter, the 7 workers were rebooked to the July 4,1981 flight of petitioner with 6 more workers
booked for said flight. Unfortunately, the confirmed bookings of the 13 workers were again cancelled
and rebooked to July 7, 1981.
On July 6, 1981, private respondent paid the travel tax of the said workers as required by the
petitioner but when the receipt of the tax payments was submitted, the latter informed private
respondent that it can only confirm the seats of the 12 workers on its July 7, 1981 flight. However,
the confirmed seats of said workers were again cancelled without any prior notice either to the
private respondent or said workers. The 12 workers were finally able to leave for Jeddah after
private respondent had bought tickets from the other airlines.

As a result of these incidents, private respondent sent a letter to petitioner demanding compensation
for the damages it had incurred by the latter's repeated failure to transport its contract workers
despite confirmed bookings and payment of the corresponding travel taxes.

On July 23, 1981, the counsel of private respondent sent another letter to the petitioner demanding
the latter to pay the amount of P350,000.00 representing damages and unrealized profit or income
which was denied by the petitioner.

On August 8, 1981, private respondent received a telex message from its principal cancelling the
hiring of the remaining recruited workers due to the delay in transporting the workers to Jeddah.5

On January 27, 1982, private respondent filed a complaint for damages against petitioner with the
Regional Trial Court of Manila, Branch 1 in Civil Case No. 82-4653.

On the other hand, petitioner, alleged in its Answer with counterclaims that it received a telex
message from Jeddah on March 20, 1981 advising that the principal of private respondent had
prepaid the airfares of 100 persons to transport private respondent's contract workers from Manila to
Jeddah on or before March 30, 1981. However, due to the unavailability of space and limited time,
petitioner had to return to its sponsor in Jeddah the prepaid ticket advice consequently not even one
of the alleged 93 contract workers were booked in any of its flights.

On June 5, 1981, petitioner received another prepaid ticket advice to transport 16 contract workers
of private respondent to Jeddah but the travel agent of the private respondent booked only 10
contract workers for petitioner's June 9, 1981 flight. However, only 9 contract workers boarded the
scheduled flight with 1 passenger not showing up as evidenced by the Philippine Airlines' passenger
manifest for Flight BA-020 (Exhibit "7", "7-A", "7-B" and "7-C").6

Thereafter, private respondent's travel agent booked seats for 5 contract workers on petitioner's July
4, 1981 flight but said travel agent cancelled the booking of 2 passengers while the other 3
passengers did not show up on said flight.

Sometime in July 1981, the travel agent of the private respondent booked 7 more contract workers in
addition to the previous 5 contract workers who were not able to board the July 4, 1981 flight with
the petitioner's July 7, 1981 flight which was accepted by petitioner subject to reconfirmation.

However on July 6, 1981, petitioner's computer system broke down which resulted to petitioner's
failure to get a reconfirmation from Saudi Arabia Airlines causing the automatic cancellation of the
bookings of private respondent's 12 contract workers. In the morning of July 7, 1981, the computer
system of the petitioner was reinstalled and immediately petitioner tried to reinstate the bookings of
the 12 workers with either Gulf Air or Saudi Arabia Airlines but both airlines replied that no seat was
available on that date and had to place the 12 workers on the wait list. Said information was duly
relayed to the private respondent and the 12 workers before the scheduled flight.

After due trial on or on August 27, 1985, the trial court rendered its decision, the dispositive portion
of which reads as follows:
 WHEREFORE, in view of all the foregoing, this Court renders judgment:

1. Ordering the defendant to pay the plaintiff actual damages in the sum of
P308,016.00;

2. Ordering defendant to pay moral damages to the plaintiff in the amount of

P20,000.00;

3. Ordering the defendant to pay the plaintiff P10,000.00 by way of corrective or

exemplary damages;

4. Ordering the defendant to pay the plaintiff 30% of its total claim for and as
attorney's fees; and

5. To pay the costs.7

On March 13, 1986, petitioner appealed said decision to respondent appellate court after the trial
court denied its Motion for Reconsideration on February 28, 1986.

On November 15, 1989, respondent appellate court affirmed the decision of the trial court, the
dispositive portion of which reads:

WHEREFORE, the decision appealed from is hereby AFFIRMED with costs against
the appellant.8

On December 9, 1989, petitioner filed a Motion for Reconsideration which was also denied.

Hence, this petition.

It is the contention of petitioner that private respondent has no cause of action against it there being
no perfected contract of carriage existing between them as no ticket was ever issued to private
respondent's contract workers and, therefore, the obligation of the petitioner to transport said
contract workers did not arise. Furthermore, private respondent's failure to attach any ticket in the
complaint further proved that it was never a party to the alleged transaction.

Petitioner's contention is untenable.

Private respondent had a valid cause of action for damages against petitioner. A cause of action is
an act or omission of one party in violation of the legal right or rights of the other.9 Petitioner's
repeated failures to transport private respondent's workers in its flight despite confirmed booking of
said workers clearly constitutes breach of contract and bad faith on its part. In resolving petitioner's
theory that private respondent has no cause of action in the instant case, the appellate court
correctly held that:

In dealing with the contract of common carriage of passengers for purpose of

accuracy, there are two (2) aspects of the same, namely: (a) the contract "to carry (at
some future time)," which contract is consensual and is necessarily perfected by
mere consent (See Article 1356, Civil Code of the Philippines), and (b) the contract
"of carriage" or "of common carriage" itself which should be considered as a real
contract for not until the carrier is actually used can the carrier be said to have
already assumed the obligation of a carrier. (Paras, Civil Code Annotated, Vol. V, p.
429, Eleventh Ed.)

In the instant case, the contract "to carry" is the one involved which is consensual
and is perfected by the mere consent of the parties.

There is no dispute as to the appellee's consent to the said contract "to carry" its
contract workers from Manila to Jeddah. The appellant's consent thereto, on the
other hand, was manifested by its acceptance of the PTA or prepaid ticket advice
that ROLACO Engineering has prepaid the airfares of the appellee's contract workers
advising the appellant that it must transport the contract workers on or before the end
of March, 1981 and the other batch in June, 1981.

Even if a PTA is merely an advice from the sponsors that an airline is authorized to
issue a ticket and thus no ticket was yet issued, the fact remains that the passage
had already been paid for by the principal of the appellee, and the appellant had
accepted such payment. The existence of this payment was never objected to nor
questioned by the appellant in the lower court. Thus, the cause or consideration
which is the fare paid for the passengers exists in this case.

The third essential requisite of a contract is an object certain. In this contract "to
carry", such an object is the transport of the passengers from the place of departure
to the place of destination as stated in the telex.

Accordingly, there could be no more pretensions as to the existence of an oral

contract of carriage imposing reciprocal obligations on both parties.

In the case of appellee, it has fully complied with the obligation, namely, the payment
of the fare and its willingness for its contract workers to leave for their place of
destination.

On the other hand, the facts clearly show that appellant was remiss in its obligation
to transport the contract workers on their flight despite confirmation and bookings
made by appellee's travelling agent.

xxx xxx xxx

Besides, appellant knew very well that time was of the essence as the prepaid ticket
advice had specified the period of compliance therewith, and with emphasis that it
could only be used if the passengers fly on BA. Under the circumstances, the
appellant should have refused acceptance of the PTA from appellee's principal or to
at least inform appellee that it could not accommodate the contract workers.

xxx xxx xxx

While there is no dispute that ROLACO Engineering advanced the payment for the
airfares of the appellee's contract workers who were recruited for ROLACO
Engineering and the said contract workers were the intended passengers in the
aircraft of the appellant, the said contract "to carry" also involved the appellee for as
recruiter he had to see to it that the contract workers should be transported to
ROLACO Engineering in Jeddah thru the appellant's transportation. For that matter,
 the involvement of the appellee in the said contract "to carry" was well demonstrated
when
the appellant upon receiving the PTA immediately advised the appellee thereof. 10

Petitioner also contends that the appellate court erred in awarding actual damages in the amount of
P308,016.00 to private respondent since all expenses had already been subsequently reimbursed
by the latter's principal.

In awarding actual damages to private respondent, the appellate court held that the amount of
P308,016.00 representing actual damages refers to private respondent's second cause of action
involving the expenses incurred by the latter which were not reimbursed by ROLACO Engineering.
However, in the Complaint 11 filed by private respondent, it was alleged that private respondent
suffered actual damages in the amount of P308,016.00 representing the money it borrowed from
friends and financiers which is P304,416.00 for the 93 airline tickets and P3,600.00 for the travel tax
of the 12 workers. It is clear therefore that the actual damages private respondent seeks to recover
are the airline tickets and travel taxes it spent for its workers which were already reimbursed by its
principal and not for any other expenses it had incurred in the process of recruiting said contract
workers. Inasmuch as all expenses including the processing fees incurred by private respondent had
already been paid for by the latter's principal on a staggered basis as admitted in open court by its
managing director, Mrs. Bienvenida Brusellas. 12 We do not find anymore justification in the appellate
court's decision in granting actual damages to private respondent.

Thus, while it may be true that private respondent was compelled to borrow money for the airfare
tickets of its contract workers when petitioner failed to transport said workers, the reimbursements
made by its principal to private respondent failed to support the latter's claim that it suffered actual
damages as a result of petitioner's failure to transport said workers. It is undisputed that private
respondent had consistently admitted that its principal had reimbursed all its expenses.

Article 2199 of the Civil Code provides that:

Except as provided by law or by stipulations, one is entitled to an adequate

compensation only for such pecuniary loss suffered by him as he has duly proved.
Such compensation is referred to as actual or compensatory damages.

Furthermore, actual or compensatory damages cannot be presumed, but must be duly proved, and
proved with reasonable degree of certainty. A court cannot rely on speculation, conjecture or
guesswork as to the fact and amount of damages, but must depend upon competent proof that they
have suffered and on evidence of the actual amount thereof. 13

However, private respondent is entitled to an award of moral and exemplary damages for the injury
suffered as a result of petitioner's failure to transport the former's workers because of the latter's
patent bad faith in the performance of its obligation. As correctly pointed out by the appellate court:

As evidence had proved, there was complete failure on the part of the appellant to
transport the 93 contract workers of the appellee on or before March 30, 1981
despite receipt of the payment for their airfares, and acceptance of the same by the
appellant, with specific instructions from the appellee's principal to transport the
contract workers on or before March 30, 1981. No previous notice was ever
registered by the appellant that it could not comply with the same. And then followed
the detestable act of appellant in unilaterally cancelling, booking and rebooking
unreasonably the flight of appellee's contract workers in June to July, 1981 without
prior notice. And all of these actuations of the appellant indeed constitute malice and
 evident bad faith which had caused damage and besmirched the reputation and
business image of the appellee. 14

As to the alleged damages suffered by the petitioner as stated in its counterclaims, the record shows
that no claim for said damages was ever made by the petitioner immediately after their alleged
occurrence therefore said counterclaims were mere afterthoughts when private respondent filed the
present case.

WHEREFORE, the assailed decision is hereby AFFIRMED with the MODIFICATION that the award
of actual damages be deleted from said decision.

SO ORDERED.

Narvasa, C.J., Feliciano, Regalado and Campos, Jr., JJ., concur.

# Footnotes

1 Rollo, pp. 48-61. Ponente: Justice Gloria C. Paras with the concurrence of Justice
Venancio D. Aldecoa, Jr. and Justice Regina G. Ordoñez-Benitez.

2 Id., at pp. 176-181, Penned by Judge Rosalio C. Segundo.

3 Id., at pp. 90-94.

4 Exhibit "B," Original Records, p. 48.

5 Exhibit "E," Original Records, at p. 58.

6 Folder of Exhibits, pp. 21-24.

7 Rollo, pp. 180-181.

8 Id., at p. 60.

9 Rebollido vs. Court of Appeals, 170 SCRA 800 [1989].

10 Rollo, pp. 54-57.

11 Original Record, pp. 1-6.

12 T.S.N., July 5, 1985, pp. 11-19.

13 Dichoso vs. Court of Appeals, 192 SCRA 169 [1990].

14 Rollo, p. 59.
G.R. No. 114061 August 3, 1994

KOREAN AIRLINES CO., LTD., petitioner,

vs.
COURT OF APPEALS and JUANITO C. LAPUZ, respondents.

G.R. No. 113842 August 3, 1994

JUANITO C. LAPUZ, petitioner,

vs.
COURT OF APPEALS and KOREAN AIRLINES CO., LTD., respondents.

M.A. Aguinaldo and Associates for Korean Airlines Co., Ltd.

Camacho and Associates for Juanito Lapuz.

CRUZ, J.:

Sometime in 1980, Juanito C. Lapuz, an automotive electrician, was contracted for employment in
Jeddah, Saudi Arabia, for a period of one year through Pan Pacific Overseas Recruiting Services,
Inc. Lapuz was supposed to leave on November 8, 1980, via Korean Airlines. Initially, he was "wait-
listed," which meant that he could only be accommodated if any of the confirmed passengers failed
to show up at the airport before departure. When two of such passengers did not appear, Lapuz and
another person by the name of Perico were given the two unclaimed seats.

According to Lapuz, he was allowed to check in with one suitcase and one shoulder bag at the
check-in counter of KAL. He passed through the customs and immigration sections for routine
check-up and was cleared for departure as Passenger No. 157 of KAL Flight No. KE 903. Together
with the other passengers, he rode in the shuttle bus and proceeded to the ramp of the KAL aircraft
for boarding. However, when he was at the third or fourth rung of the stairs, a KAL officer pointed to
him and shouted "Down! Down!" He was thus barred from taking the flight. When he later asked for
another booking, his ticket was canceled by KAL. Consequently, he was unable to report for his work
in Saudi Arabia within the stipulated 2-week period and so lost his employment.

KAL, on the other hand, alleged that on November 8, 1980, Pan Pacific Recruiting Services Inc.
coordinated with KAL for the departure of 30 contract workers, of whom only 21 were confirmed and
9 were wait-listed passengers. The agent of Pan Pacific, Jimmie Joseph, after being informed that
there was a possibility of having one or two seats becoming available, gave priority to Perico, who
was one of the supervisors of the hiring company in Saudi Arabia. The other seat was won through
lottery by Lapuz. However, only one seat became available and so, pursuant to the earlier
agreement that Perico was to be given priority, he alone was allowed to board.

After trial, the Regional Trial Court of Manila, Branch 30, 1 adjudged KAL liable for damages,
disposing as follows:

WHEREFORE, in view of the foregoing consideration, judgment is hereby rendered

sentencing the defendant Korean Air Lines to pay plaintiff Juanito C. Lapuz the
following:
 1. The amount of TWO HUNDRED SEVENTY-TWO THOUSAND ONE HUNDRED
SIXTY (P272,160.00) PESOS as actual/compensatory damages, with legal interest
thereon from the date of the filing of the complaint until fully paid.

2. The sum of TWENTY-FIVE THOUSAND (P25,000.00) PESOS as and for

attorney's fees; and

3. The costs of suit.

The case is hereby dismissed with respect to defendant Pan Pacific Overseas
Recruiting Services, Inc.

The counterclaims and cross-claim of defendant Korean Air Lines Co., Ltd. are
likewise dismissed.

On appeal, this decision was modified by the Court of Appeals 2 as follows:

WHEREFORE, in view of all the foregoing, the appealed judgment is hereby

AFFIRMED with the following modifications: the amount of actual damages
and compensatory damages is reduced to P60,000.00 and defendant-
appellant is hereby ordered to pay plaintiff-appellant the sum of One Hundred
Thousand Pesos (P100,000.00) by way of moral and exemplary damages, at
6% interest per annum from the date of the filing of the Complaint until fully
paid.

KAL and Lapuz filed their respective motions for reconsideration, which were both denied for lack of
merit. Hence, the present petitions for review which have been consolidated because of the identity
of the parties and the similarity of the issues.

In G. R. No. 114061, KAL assails the decision of the appellate court on the following grounds:

1. That the Court of Appeals erred in concluding that petitioner committed a

breach of contract of carriage notwithstanding lack of proper, competent and
sufficient evidence of the existence of such contract.

2. That the Court of Appeals erred in not according the proper evidentiary
weight to some evidence presented and the fact that private respondent did
not have any boarding pass to prove that he was allowed to board and to
prove that his airline ticket was confirmed.

3. That the Court of Appeals erred in concluding that the standby passenger
status of private respondent Lapuz was changed to a confirmed status when
his name was entered into the passenger manifest.

4. That the Court of Appeals abused its discretion in awarding moral and
exemplary damages in the amount of P100,000.00 in favor of private
respondent notwithstanding its lack of basis and private respondent did not
state such amount in his complaint nor had private respondent proven the
said damages.

5. That the Court of Appeals erred in dismissing the counterclaims.

 6. That the Court of Appeals erred in dismissing the counterclaim of petitioner
against Pan Pacific.

7. That the Court of Appeals erred in ruling that the 6% per annum legal
interest on the judgment shall be computed from the filing of the complaint.

In G. R. No. 113842, Lapuz seeks: (a) the setting aside of the decision of the Court of Appeals
insofar as it modifies the award of damages; b) actual and compensatory damages in the sum
equivalent to 5 years' loss of earnings based on the petitioner's monthly salary of 1,600 Saudi rials at
the current conversion rate plus the cost of baggage and personal belongings worth P2,000 and the
service fee of P3,000 paid to the recruiting agency, all with legal interest from the filing of the
complaint until fully paid; c) moral damages of not less than P1 million and exemplary damages of
not less than P500,000.00, both with interest at 6% per annum from the filing of the complaint; and
d) attorney's fees in the sum equivalent to 30% of the award of damages.

It is evident that the issues raised in these petitions relate mainly to the correctness of the factual
findings of the Court of Appeals and the award of damages. The Court has consistently affirmed that
the findings of fact of the Court of Appeals and the other lower courts are as a rule binding upon it,
subject to certain exceptions. As nothing in the record indicates any of such exceptions, the factual
conclusions of the appellate court must be affirmed.

The status of Lapuz as standby passenger was changed to that of a confirmed passenger when his
name was entered in the passenger manifest of KAL for its Flight No. KE 903. His clearance through
immigration and customs clearly shows that he had indeed been confirmed as a passenger of KAL
in that flight. KAL thus committed a breach of the contract of carriage between them when it failed to
bring Lapuz to his destination.

This Court has held that a contract to transport passengers is different in kind and degree from any
other contractual relation. 3 The business of the carrier is mainly with the traveling public. It invites
people to avail themselves of the comforts and advantages it offers. The contract of air carriage
generates a relation attended with a public duty. Passengers have the right to be treated by the
carrier's employees with kindness, respect, courtesy and due consideration. They are entitled to be
protected against personal misconduct, injurious language, indignities and abuses from such
employees. 4 So it is that any discourteous conduct on the part of these employees toward a
passenger gives the latter an action for damages against the carrier.

The breach of contract was aggravated in this case when, instead of courteously informing Lapuz of
his being a "wait-listed" passenger, a KAL officer rudely shouted "Down! Down!" while pointing at
him, thus causing him embarrassment and public humiliation.

KAL argues that "the evidence of confirmation of a chance passenger status is not through the entry
of the name of a chance passenger in the passenger manifest nor the clearance from the
Commission on Immigration and Deportation, because they are merely means of facilitating the
boarding of a chance passenger in case his status is confirmed." We are not persuaded.

The evidence presented by Lapuz shows that he had indeed checked in at the departure counter,
passed through customs and immigration, boarded the shuttle bus and proceeded to the ramp of
KAL's aircraft. In fact, his baggage had already been loaded in KAL's aircraft, to be flown with him to
Jeddah. The contract of carriage between him and KAL had already been perfected when he was
summarily and insolently prevented from boarding the aircraft.
KAL's allegation that the respondent court abused its discretion in awarding moral and exemplary
damages is also not tenable.

The Court of Appeals granted moral and exemplary damages because:

The findings of the court a quo that the defendant-appellant has committed
breach of contract of carriage in bad faith and in wanton, disregard of
plaintiff-appellant's rights as passenger laid the basis and justification of an
award for moral damages.

xxxx

In the instant case, we find that defendant-appellant Korean Air Lines acted
in a wanton, fraudulent, reckless, oppressive or malevolent manner when it
"bumped off" plaintiff-appellant on November 8, 1980, and in addition treated
him rudely and arrogantly as a "patay gutom na contract worker fighting
Korean Air Lines," which clearly shows malice and bad faith, thus entitling
plaintiff-appellant to moral damages.

xxxx

Considering that the plaintiff-appellant's entitlement to moral damages has

been fully established by oral and documentary evidence, exemplary
damages may be awarded. In fact, exemplary damages may be awarded,
even though not so expressly pleaded in the complaint (Kapoe vs. Masa, 134
SCRA 231). By the same token, to provide an example for the public good,
an award of exemplary damages is also proper (Armovit vs. Court of
Appeals, supra).

On the other hand, Lapuz's claim that the award of P100,000.00 as moral and exemplary damages
is inadequate is not acceptable either. His prayer for moral damages of not less than P1 million and
exemplary damages of not less than P500,000.00 is overblown.

The well-entrenched principle is that moral damages depend upon the discretion of the court based
on the circumstances of each case. 5 This discretion is limited by the principle that the "amount
awarded should not be palpably and scandalously excessive" as to indicate that it was the result of
prejudice or corruption on the part of the trial court. 6 Damages are not intended to enrich the
complainant at the expense of the defendant. They are awarded only to alleviate the moral suffering
that the injured party had undergone by reason of the defendant's culpable action. 7 There is no
hard-and-fast rule in the determination of what would be a fair amount of moral damages since each
case must be governed by its own peculiar facts.

A review of the record of this case shows that the injury suffered by Lapuz is not so serious or
extensive as to warrant an award of P1.5 million. The assessment of P100,000 as moral and
exemplary damages in his favor is, in our view, reasonable and realistic.

Lapuz likewise claims that the respondent court could not rule upon the propriety of the award of
actual damages because it had not been assigned as an error by KAL. Not so. The rule is that only
errors specifically assigned and properly argued in the brief will be considered except errors
affecting jurisdiction over the subject matter and plain as well as clerical errors. 8 But this is not
without qualification for, as the Court held in Vda. de Javellana vs. Court of Appeals: 9
 . . . [T]he Court is clothed with ample authority to review matters, even if they
are not assigned as errors in their appeal, if it finds that their consideration is
necessary in arriving at a just decision of the case.

A similar pronouncement was made in Baquiran vs. Court of Appeals 10 in this wise:

Issues, though not specifically raised in the pleading in the appellate court,
may, in the interest of justice, be properly considered by said court in
deciding a case, if they are questions raised in the trial court and are matters
of record having some bearing on the issue submitted which the parties failed
to raise or the lower court ignored.

The Court of Appeals was therefore justified in decreasing the award of actual damages even if the
issue was not assigned as an error by KAL. Consideration of this question was necessary for the just
and complete resolution of the present case. Furthermore, there was enough evidence to warrant
the reduction of the original award, as the challenged decision correctly observed:

A perusal of the plaintiff-appellant's contract of employment shows that the

effectivity of the contract is for only one year, renewable every year for five
years. Although plaintiff-appellant intends to renew his contract, such renewal
will still be subject to his foreign employer. Plaintiff-appellant had not yet
started working with his foreign employer, hence, there can be no basis as to
whether his contract will be renewed by his foreign employer or not. Thus,
the damages representing the loss of earnings of plaintiff-appellant in the
renewal of the contract of employment is at most speculative. Damages may
not be awarded on the basis of speculation or conjecture (Gachalian vs.
Delim, 203 SCRA 126). Hence, defendant-appellant's liability is limited to the
one year contract only. Plaintiff-appellant is, therefore, entitled only to his lost
earnings for one year, i.e., P60,000.00, which is 1/5 of P300,000.00, the total
amount of actual damages, representing lost earnings for five years prayed
for in the Complaint.

Plaintiff-appellant's contention that in computing his lost earnings, the current

rate of the Saudi Rial to the Philippine Peso at the time of payment should be
used, is untenable, considering that in his Complaint, plaintiff-appellant has
quantified in Philippine Peso his lost earnings for five years.

We disagree with the respondent court, however, on the date when the legal interest should
commence to run. The rule is that the legal interest of six percent (6%) on the amounts adjudged in
favor of Lapuz should resume from the time of the rendition of the trial court's decision instead of
November 28, 1980, the date of the filing of the complaint.

On this matter, the Court has held:

If suit were for payment of a definite sum of money, the contention might be
tenable. However, if it is for damages, unliquidated and not known until
definitely ascertained, assessed and determined by the courts after proof,
interest should be from the date of the decision. 11

xxxx
 The obligation to pay interest on a sum filed in a judgment exists from the
date of the sentence, when so declared; for until the net amount of the
debtor's liability has been determined, he cannot he considered delinquent in
the fulfillment of his obligation to pay the debt with interest thereon. 12

Finally, we find that the respondent court did not err in sustaining the trial court's dismissal of KAL's
counterclaim against Pan Pacific Overseas Recruiting Services Inc., whose responsibility ended with
the confirmation by KAL of Lapuz as its passenger in its Flight No. 903.

This is still another case of the maltreatment of our overseas contract workers, this time by the
airline supposed to bring the passenger to his foreign assignment. Our OCW's sacrifice much in
seeking employment abroad, where they are deprived of the company of their loved ones, the direct
protection of our laws, and the comfort of our own native culture and way of life. This Court shall
exert every effort to vindicate their rights when they are abused and shall accord them the
commensurate reparation of their injuries consistent with their dignity and worth as members of the
working class.

WHEREFORE, the appealed judgment is AFFIRMED, but with the modification that the legal interest
on the damages awarded to private respondent should commence from the date of the decision of
the trial court on November 14, 1990. The parties shall bear their own costs.

SO ORDERED.

Davide, Jr., Quiason and Kapunan, JJ., concur.

Bellosillo, J., is on official leave.

#Footnotes

1 Penned by Judge Jesus O. Ibay; Rollo, pp. 32-46 (G. R. No. 114061).

2 Ynares-Santiago, J., ponente with Herrera and Ibay-Somera, JJ., concurring.

3 Zulueta vs. Pan American World Airways Inc., 43 SCRA 397; Pan American orld
Airways vs. IAC, 153 SCRA 521; Air France vs. Carrascoso, 18 SCRA 155.

4 Air France vs. Carrascoso, supra.

5 Prudenciado vs. Alliance Transport System, 148 SCRA 440; Pleno vs. CA, 161
SCRA 208; Mayo vs. People, 204 SCRA 642.

6 Siguenza vs. CA, 137 SCRA 570; Prudenciado vs. Alliance Transport
System, supra; Gellada vs. Warner Barnes & Co., 57 O. G. [4], 7358.

7 R & B Surety & Insurance Co., Inc. vs. IAC, 129 SCRA 736; Grand Union
Supermarket, Inc. vs. Espino, Jr., 94 SCRA 953.

8 Sec. 7, Rule 51 of the Rules of Court; Hernandez vs. Andal, 78 SCRA 196.
9 123 SCRA 799.

10 2 SCRA 873.

11 Rivera vs. Matute, 98 Phil. 516.

12 Montilla vs. Augustinian Corp., 25 Phil. 447.

G.R. No. 111127 July 26, 1996

MR. & MRS. ENGRACIO FABRE, JR. and PORFIRIO CABIL, petitioners,
vs.
COURT OF APPEALS, THE WORD FOR THE WORLD CHRISTIAN FELLOWSHIP, INC.,
AMYLINE ANTONIO, JOHN RICHARDS, GONZALO GONZALES, VICENTE V. QUE, JR., ICLI
CORDOVA, ARLENE GOJOCCO, ALBERTO ROXAS CORDERO, RICHARD BAUTISTA,
JOCELYN GARCIA, YOLANDA CORDOVA, NOEL ROQUE, EDWARD TAN, ERNESTO
NARCISO, ENRIQUETA LOCSIN, FRANCIS NORMAN O. LOPES, JULIUS CAESAR, GARCIA,
ROSARIO MA. V. ORTIZ, MARIETTA C. CLAVO, ELVIE SENIEL, ROSARIO MARA-MARA,
TERESITA REGALA, MELINDA TORRES, MARELLA MIJARES, JOSEFA CABATINGAN, MARA
NADOC, DIANE MAYO, TESS PLATA, MAYETTE JOCSON, ARLENE Y. MORTIZ, LIZA MAYO,
CARLOS RANARIO, ROSAMARIA T. RADOC and BERNADETTE FERRER, respondents.

MENDOZA, J.:p

This is a petition for review on certiorari of the decision of the Court of Appeals1 in CA-GR No. 28245, dated September 30, 1992, which
affirmed with modification the decision of the Regional Trial Court of Makati, Branch 58, ordering petitioners jointly and severally to pay
damages to private respondent Amyline Antonio, and its resolution which denied petitioners' motion for reconsideration for lack of merit.

Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda minibus. They
used the bus principally in connection with a bus service for school children which they operated in
Manila. The couple had a driver, Porfirio J. Cabil, whom they hired in 1981, after trying him out for
two weeks, His job was to take school children to and from the St. Scholastica's College in Malate,
Manila.

On November 2, 1984 private respondent Word for the World Christian Fellowship Inc. (WWCF)
arranged with petitioners for the transportation of 33 members of its Young Adults Ministry from
Manila to La Union and back in consideration of which private respondent paid petitioners the
amount of P3,000.00.

The group was scheduled to leave on November 2, 1984, at 5:00 o'clock in the afternoon. However,
as several members of the party were late, the bus did not leave the Tropical Hut at the corner of
Ortigas Avenue and EDSA until 8:00 o'clock in the evening. Petitioner Porfirio Cabil drove the
minibus.

The usual route to Caba, La Union was through Carmen, Pangasinan. However, the bridge at
Carmen was under repair, sot hat petitioner Cabil, who was unfamiliar with the area (it being his first
trip to La Union), was forced to take a detour through the town of Baay in Lingayen, Pangasinan. At
11:30 that night, petitioner Cabil came upon a sharp curve on the highway, running on a south to
east direction, which he described as "siete." The road was slippery because it was raining, causing
the bus, which was running at the speed of 50 kilometers per hour, to skid to the left road shoulder.
The bus hit the left traffic steel brace and sign along the road and rammed the fence of one Jesus
Escano, then turned over and landed on its left side, coming to a full stop only after a series of
impacts. The bus came to rest off the road. A coconut tree which it had hit fell on it and smashed its
front portion.

Several passengers were injured. Private respondent Amyline Antonio was thrown on the floor of the
bus and pinned down by a wooden seat which came down by a wooden seat which came off after
being unscrewed. It took three persons to safely remove her from this portion. She was in great pain
and could not move.
The driver, petitioner Cabil, claimed he did not see the curve until it was too late. He said he was not
familiar with the area and he could not have seen the curve despite the care he took in driving the
bus, because it was dark and there was no sign on the road. He said that he saw the curve when he
was already within 15 to 30 meters of it. He allegedly slowed down to 30 kilometers per hour, but it
was too late.

The Lingayen police investigated the incident the next day, November 3, 1984. On the basis of their
finding they filed a criminal complaint against the driver, Porfirio Cabil. The case was later filed with
the Lingayen Regional Trial Court. Petitioners Fabre paid Jesus Escano P1,500.00 for the damage
to the latter's fence. On the basis of Escano's affidavit of desistance the case against petitioners
Fabre was dismissed.

Amyline Antonio, who was seriously injured, brought this case in the RTC of Makati, Metro Manila.
As a result of the accident, she is now suffering from paraplegia and is permanently paralyzed from
the waist down. During the trial she described the operations she underwent and adduced evidence
regarding the cost of her treatment and therapy. Immediately after the accident, she was taken to the
Nazareth Hospital in Baay, Lingayen. As this hospital was not adequately equipped, she was
transferred to the Sto. Niño Hospital, also in the town of Ba-ay, where she was given sedatives. An
x-ray was taken and the damage to her spine was determined to be too severe to be treated there.
She was therefore brought to Manila, first to the Philippine General Hospital and later to the Makati
Medical Center where she underwent an operation to correct the dislocation of her spine.

In its decision dated April 17, 1989, the trial court found that:

No convincing evidence was shown that the minibus was properly checked for travel to a long
distance trip and that the driver was properly screened and tested before being admitted for
employment. Indeed, all the evidence presented have shown the negligent act of the defendants
which ultimately resulted to the accident subject of this case.

Accordingly, it gave judgment for private respondents holding:

Considering that plaintiffs Word for the World Christian Fellowship, Inc. and Ms. Amyline Antonio
were the only ones who adduced evidence in support of their claim for damages, the Court is
therefore not in a position to award damages to the other plaintiffs.

WHEREFORE, premises considered, the Court hereby renders judgment against defendants Mr. &
Mrs. Engracio Fabre, Jr. and Porfirio Cabil y Jamil pursuant to articles 2176 and 2180 of the Civil
Code of the Philippines and said defendants are ordered to pay jointly and severally to the plaintiffs
the following amount:

1) P93,657.11 as compensatory and actual damages;

2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff

Amyline Antonio;

3) P20,000.00 as moral damages;

4) P20,000.00 as exemplary damages; and

5) 25% of the recoverable amount as attorney's fees;

 6) Costs of suit.

SO ORDERED.

The Court of Appeals affirmed the decision of the trial court with respect to Amyline Antonio but
dismissed it with respect to the other plaintiffs on the ground that they failed to prove their respective
claims. The Court of Appeals modified the award of damages as follows:

1) P93,657.11 as actual damages;

2) P600,000.00 as compensatory damages;

3) P50,000.00 as moral damages;

4) P20,000.00 as exemplary damages;

5) P10,000.00 as attorney's fees; and

6) Costs of suit.

The Court of Appeals sustained the trial court's finding that petitioner Cabil failed to exercise due
care and precaution in the operation of his vehicle considering the time and the place of the
accident. The Court of Appeals held that the Fabres were themselves presumptively negligent.
Hence, this petition. Petitioners raise the following issues:

I. WHETHER OR NOT PETITIONERS WERE NEGLIGENT.

II. WHETHER OF NOT PETITIONERS WERE LIABLE FOR THE

INJURIES SUFFERED BY PRIVATE RESPONDENTS.

III WHETHER OR NOT DAMAGES CAN BE AWARDED AND IN

THE POSITIVE, UP TO WHAT EXTENT.

Petitioners challenge the propriety of the award of compensatory damages in the amount of
P600,000.00. It is insisted that, on the assumption that petitioners are liable an award of
P600,000.00 is unconscionable and highly speculative. Amyline Antonio testified that she was a
casual employee of a company called "Suaco," earning P1,650.00 a month, and a dealer of Avon
products, earning an average of P1,000.00 monthly. Petitioners contend that as casual employees
do not have security of tenure, the award of P600,000.00, considering Amyline Antonio's earnings, is
without factual basis as there is no assurance that she would be regularly earning these amounts.

With the exception of the award of damages, the petition is devoid of merit.

First, it is unnecessary for our purpose to determine whether to decide this case on the theory that
petitioners are liable for breach of contract of carriage or culpa contractual or on the theory of quasi
delict or culpa aquiliana as both the Regional Trial Court and the Court of Appeals held, for although
the relation of passenger and carrier is "contractual both in origin and nature," nevertheless "the act
that breaks the contract may be also a tort." 2 In either case, the question is whether the bus driver,
petitioner Porfirio Cabil, was negligent.
The finding that Cabil drove his bus negligently, while his employer, the Fabres, who owned the bus,
failed to exercise the diligence of a good father of the family in the selection and supervision of their
employee is fully supported by the evidence on record. These factual findings of the two courts we
regard as final and conclusive, supported as they are by the evidence. Indeed, it was admitted by
Cabil that on the night in question, it was raining, and as a consequence, the road was slippery, and
it was dark. He averred these facts to justify his failure to see that there lay a sharp curve ahead.
However, it is undisputed that Cabil drove his bus at the speed of 50 kilometers per hour and only
slowed down when he noticed the curve some 15 to 30 meters ahead. 3 By then it was too late for
him to avoid falling off the road. Given the conditions of the road and considering that the trip was
Cabil's first one outside of Manila, Cabil should have driven his vehicle at a moderate speed. There
is testimony 4 that the vehicles passing on that portion of the road should only be running 20
kilometers per hour, so that at 50 kilometers per hour, Cabil was running at a very high speed.

Considering the foregoing — the fact that it was raining and the road was slippery, that it was dark,
that he drove his bus at 50 kilometers an hour when even on a good day the normal speed was only
20 kilometers an hour, and that he was unfamiliar with the terrain, Cabil was grossly negligent and
should be held liable for the injuries suffered by private respondent Amyline Antonio.

Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the presumption that
his employers, the Fabres, were themselves negligent in the selection and supervisions of their
employee.

Due diligence in selection of employees is not satisfied by finding that the applicant possessed a
professional driver's license. The employer should also examine the applicant for his qualifications,
experience and record of service. 5 Due diligence in supervision, on the other hand, requires the
formulation of rules and regulations for the guidance of employees and issuance of proper
instructions as well as actual implementation and monitoring of consistent compliance with the rules.6

In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union, apparently did not
consider the fact that Cabil had been driving for school children only, from their homes to the St.
Scholastica's College in Metro Manila. 7 They had hired him only after a two-week apprenticeship.
They had hired him only after a two-week apprenticeship. They had tested him for certain matters,
such as whether he could remember the names of the children he would be taking to school, which
were irrelevant to his qualification to drive on a long distance travel, especially considering that the
trip to La Union was his first. The existence of hiring procedures and supervisory policies cannot be
casually invoked to overturn the presumption of negligence on the part of an employer. 8

Petitioners argue that they are not liable because (1) an earlier departure (made impossible by the
congregation's delayed meeting) could have a averted the mishap and (2) under the contract, the
WWCF was directly responsible for the conduct of the trip. Neither of these contentions hold water.
The hour of departure had not been fixed. Even if it had been, the delay did not bear directly on the
cause of the accident. With respect to the second contention, it was held in an early case that:

[A] person who hires a public automobile and gives the driver directions as to the place to which he
wishes to be conveyed, but exercises no other control over the conduct of the driver, is not
responsible for acts of negligence of the latter or prevented from recovering for injuries suffered from
a collision between the automobile and a train, caused by the negligence or the automobile driver. 9

As already stated, this case actually involves a contract of carriage. Petitioners, the Fabres, did not
have to be engaged in the business of public transportation for the provisions of the Civil Code on
common carriers to apply to them. As this Court has held: 10
 Art. 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air for compensation, offering their services to the public.

The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such carrying
only as an ancillary activity (in local idiom, as "a sideline"). Article 1732 also carefully
avoids making any distinction between a person or enterprise offering transportation
service on a regular or scheduled basis and one offering such service on an
occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish
between a carrier offering its services to the "general public," i.e., the general
community or population, and one who offers services or solicits business only from
a narrow segment of the general population. We think that Article 1732 deliberately
refrained from making such distinctions.

As common carriers, the Fabres were found to exercise "extraordinary diligence" for
the safe transportation of the passengers to their destination. This duty of care is not
excused by proof that they exercise the diligence of a good father of the family in the
selection and supervision of their employee. As Art. 1759 of the Code provides:

Common carriers are liable for the death of or injuries to passengers through the
negligence or willful acts of the former's employees although such employees may
have acted beyond the scope of their authority or in violation of the orders of the
common carriers.

This liability of the common carriers does not cease upon proof that they exercised
all the diligence of a good father of a family in the selection and supervision of their
employees.

The same circumstances detailed above, supporting the finding of the trial court and of the appellate
court that petitioners are liable under Arts. 2176 and 2180 for quasi delict, fully justify findings them
guilty of breach of contract of carriage under Arts. 1733, 1755 and 1759 of the Civil Code.

Secondly, we sustain the award of damages in favor of Amyline Antonio. However, we think the
Court of Appeals erred in increasing the amount of compensatory damages because private
respondents did not question this award as inadequate. 11 To the contrary, the award of P500,000.00
for compensatory damages which the Regional Trial Court made is reasonable considering the
contingent nature of her income as a casual employee of a company and as distributor of beauty
products and the fact that the possibility that she might be able to work again has not been
foreclosed. In fact she testified that one of her previous employers had expressed willingness to
employ her again.

With respect to the other awards, while the decisions of the trial court and the Court of Appeals do
not sufficiently indicate the factual and legal basis for them, we find that they are nevertheless
supported by evidence in the records of this case. Viewed as an action for quasi delict, this case falls
squarely within the purview of Art. 2219(2) providing for the payment of moral damages in cases
of quasi delict. On the theory that petitioners are liable for breach of contract of carriage, the award
of moral damages is authorized by Art. 1764, in relation to Art. 2220, since Cabil's gross negligence
amounted to bad faith.12 Amyline Antonio's testimony, as well as the testimonies of her father and
copassengers, fully establish the physical suffering and mental anguish she endured as a result of
the injuries caused by petitioners' negligence.
The award of exemplary damages and attorney's fees was also properly made. However, for the
same reason that it was error for the appellate court to increase the award of compensatory
damages, we hold that it was also error for it to increase the award of moral damages and reduce
the award of attorney's fees, inasmuch as private respondents, in whose favor the awards were
made, have not appealed. 13

As above stated, the decision of the Court of Appeals can be sustained either on the theory of quasi
delict or on that of breach of contract. The question is whether, as the two courts below held,
petitioners, who are the owners and driver of the bus, may be made to respond jointly and severally
to private respondent. We hold that they may be. In Dangwa Trans. Co. Inc. v. Court of
Appeals, 14 on facts similar to those in this case, this Court held the bus company and the driver
jointly and severally liable for damages for injuries suffered by a passenger. Again, in Bachelor
Express, Inc. v. Court of
Appeals 15 a driver found negligent in failing to stop the bus in order to let off passengers when a
fellow passenger ran amuck, as a result of which the passengers jumped out of the speeding bus
and suffered injuries, was held also jointly and severally liable with the bus company to the injured
passengers.

The same rule of liability was applied in situations where the negligence of the driver of the bus on
which plaintiff was riding concurred with the negligence of a third party who was the driver of another
vehicle, thus causing an accident. In Anuran v. Buño, 16 Batangas Laguna Tayabas Bus
Co. v. Intermediate Appellate Court, 17 and Metro Manila Transit Corporation v. Court of
Appeals, 18 the bus company, its driver, the operator of the other vehicle and the driver of the vehicle
were jointly and severally held liable to the injured passenger or the latters' heirs. The basis of this
allocation of liability was explained in Viluan v. Court of Appeals, 19 thus:

Nor should it make any difference that the liability of petitioner [bus owner] springs
from contract while that of respondents [owner and driver of other vehicle] arises
from quasi-delict. As early as 1913, we already ruled in Gutierrez vs. Gutierrez, 56
Phil. 177, that in case of injury to a passenger due to the negligence of the driver of
the bus on which he was riding and of the driver of another vehicle, the drivers as
well as the owners of the two vehicles are jointly and severally liable for damages.
Some members of the Court, though, are of the view that under the circumstances
they are liable on quasi-delict. 20

It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of Appeals 21 this Court exonerated the
jeepney driver from liability to the injured passengers and their families while holding the owners of
the jeepney jointly and severally liable, but that is because that case was expressly tried and
decided exclusively on the theory of culpa contractual. As this Court there explained:

The trial court was therefore right in finding that Manalo (the driver) and spouses Mangune and
Carreon (the jeepney owners) were negligent. However, its ruling that spouses Mangune and
Carreon are jointly and severally liable with Manalo is erroneous. The driver cannot be held jointly
and severally liable with carrier in case of breach of the contract of carriage. The rationale behind
this is readily discernible. Firstly, the contract of carriage is between the carrier is exclusively
responsible therefore to the passenger, even if such breach be due to the negligence of his driver
(see Viluan v. The Court of Appeals, et al., G.R. Nos. L-21477-81, April 29, 1966, 16 SCRA 742). 22

As in the case of BLTB, private respondents in this case and her coplaintiffs did not stake out their
claim against the carrier and the driver exclusively on one theory, much less on that of breach of
contract alone. After all, it was permitted for them to allege alternative causes of action and join as
many parties as may be liable on such causes of action 23 so long as private respondent and her
coplaintiffs do not recover twice for the same injury. What is clear from the cases is the intent of the
plaintiff there to recover from both the carrier and the driver, thus, justifying the holding that the
carrier and the driver were jointly and severally liable because their separate and distinct acts
concurred to produce the same injury.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with MODIFICATION as to award
of damages. Petitioners are ORDERED to PAY jointly and severally the private respondent Amyline
Antonio the following amounts:

1) P93,657.11 as actual damages;

2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline Antonio;

3) P20,000.00 as moral damages;

4) P20,000.00 as exemplary damages;

5) 25% of the recoverable amount as attorney's fees; and

6) costs of suit.

SO ORDERED.

Regalado, Romero, Puno and Torres, Jr., JJ., concur.

Footnotes

1 Per Justice Jainal D. Rasul and concurred in by Justices Emeterio C. Cui and Segundino
G. Chua.

2 Air France v. Carrascoso, 18 SCRA 155, 168 (1966). Accord, Singson v. Bank of the
Philippines Islands, 23 SCRA 1117, 1119 (1968).

3 Testimony of Porfirio Cabil, TSN, p. 14, Oct. 26. 1987.

4 Testimony of Pat. Chito Esmenda, TSN, pp. 37-38, Sept. 12, 1985.

5 Metro Manila Transit Corp. v. Court of Appeals, 223 SCRA 521 (1993); Campo v.
Camarote, 100 Phil. 459 (1956).

6 Filamer Christian Institute v. Intermediate Appellate Court, 212 SCRA 637 (1992).

7 Testimony of Porfirio Cabil, TSN, p. 7, Oct. 26, 1987.

8 Supra note 5.

9 Yamada v. Manila Railroad Co., 33 Phil. 8, 14 (1915).

10 De Guzman v. Court of Appeals, 168 SCRA 612, 618 (1988); Bascos v. Court of Appeals,
221 SCRA 318 (1993).
 11 Philippine Airlines v. Court of Appeals, 226 SCRA 423 (1993).

12 Gatchalian v. Delim, 203 SCRA 126 (1991); Prudenciado v. Alliance Transport System,
Inc., 148 SCRA 440 (1987).

13 La Mallorca v. Court of Appeals, 175 SCRA 739 (1989).

14 202 SCRA 574 (1991).

15 188 SCRA 216 (1990).

16 17 SCRA 224 (1966).

17 167 SCRA 379 (1988).

18 223 SCRA 521 (1993).

19 16 SCRA 742 (1966).

20 Id., at 747

21 189 SCRA 158 (1988).

22 Id., at 172-173.

23 La Mallorca v. Court of Appeals, 17 SCRA 739 (1966).

Rule 8, §2 provides: "Alternative causes of action or defenses. — A party may set forth two or more
statements of a claim or defense alternatively or hypothetically, either in one cause of action or
defense or in separate causes of action or defenses. When two or more statements are made in the
alternative and one of them if made independently would be sufficient, the pleading is not made
insufficient by the insufficiency of one or more of the alternative statements."

Rule 3, §6 provides: "Permissive joinder of parties. — All persons in whom or against whom any
right to relief in respect to or arising out of the same transaction or series of transactions is alleged to
exist, whether jointly, severally, or in the alternative, may, except as otherwise provided in these
rules, join as plaintiffs or be joined as defendants in one complaint, where any question of law of fact
common to all such plaintiffs or to all such defendants may arise in the action; but the court may
make such orders as may be just to prevent any plaintiff or defendant from being embarrassed or
put to expense in connection with any proceedings in which he may have no interest."
G.R. No. L-47822 December 22, 1988

PEDRO DE GUZMAN, petitioner,

vs.
COURT OF APPEALS and ERNESTO CENDANA, respondents.

Vicente D. Millora for petitioner.

Jacinto Callanta for private respondent.

FELICIANO, J.:

Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap metal in Pangasinan. Upon gathering
sufficient quantities of such scrap material, respondent would bring such material to Manila for resale. He utilized two (2) six-wheeler trucks
which he owned for hauling the material to Manila. On the return trip to Pangasinan, respondent would load his vehicles with cargo which
various merchants wanted delivered to differing establishments in Pangasinan. For that service, respondent charged freight rates which were
commonly lower than regular commercial rates.

Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized dealer of
General Milk Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted with respondent for
the hauling of 750 cartons of Liberty filled milk from a warehouse of General Milk in Makati, Rizal, to
petitioner's establishment in Urdaneta on or before 4 December 1970. Accordingly, on 1 December
1970, respondent loaded in Makati the merchandise on to his trucks: 150 cartons were loaded on a
truck driven by respondent himself, while 600 cartons were placed on board the other truck which
was driven by Manuel Estrada, respondent's driver and employee.

Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes never reached
petitioner, since the truck which carried these boxes was hijacked somewhere along the MacArthur
Highway in Paniqui, Tarlac, by armed men who took with them the truck, its driver, his helper and
the cargo.

On 6 January 1971, petitioner commenced action against private respondent in the Court of First
Instance of Pangasinan, demanding payment of P 22,150.00, the claimed value of the lost
merchandise, plus damages and attorney's fees. Petitioner argued that private respondent, being a
common carrier, and having failed to exercise the extraordinary diligence required of him by the law,
should be held liable for the value of the undelivered goods.

In his Answer, private respondent denied that he was a common carrier and argued that he could
not be held responsible for the value of the lost goods, such loss having been due to force majeure.

On 10 December 1975, the trial court rendered a Decision 1 finding private respondent to be a
common carrier and holding him liable for the value of the undelivered goods (P 22,150.00) as well
as for P 4,000.00 as damages and P 2,000.00 as attorney's fees.

On appeal before the Court of Appeals, respondent urged that the trial court had erred in considering
him a common carrier; in finding that he had habitually offered trucking services to the public; in not
exempting him from liability on the ground of force majeure; and in ordering him to pay damages and
attorney's fees.

The Court of Appeals reversed the judgment of the trial court and held that respondent had been
engaged in transporting return loads of freight "as a casual
occupation — a sideline to his scrap iron business" and not as a common carrier. Petitioner came to
this Court by way of a Petition for Review assigning as errors the following conclusions of the Court
of Appeals:

1. that private respondent was not a common carrier;

2. that the hijacking of respondent's truck was force majeure; and

3. that respondent was not liable for the value of the undelivered cargo. (Rollo, p.
111)

We consider first the issue of whether or not private respondent Ernesto Cendana may, under the
facts earlier set forth, be properly characterized as a common carrier.

The Civil Code defines "common carriers" in the following terms:

Article 1732. Common carriers are persons, corporations, firms or associations

engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air for compensation, offering their services to the public.

The above article makes no distinction between one whose principal business activity is the carrying
of persons or goods or both, and one who does such carrying only as an ancillary activity (in local
Idiom as "a sideline"). Article 1732 also carefully avoids making any distinction between a person or
enterprise offering transportation service on a regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish
between a carrier offering its services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from a narrow segment of the
general population. We think that Article 1733 deliberaom making such distinctions.

So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly
with the notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as
amended) which at least partially supplements the law on common carriers set forth in the Civil
Code. Under Section 13, paragraph (b) of the Public Service Act, "public service" includes:

... every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general business purposes, any
common carrier, railroad, street railway, traction railway, subway motor vehicle,
either for freight or passenger, or both, with or without fixed route and whatever may
be its classification, freight or carrier service of any class, express service,
steamboat, or steamship line, pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine repair shop, wharf or
dock, ice plant,
ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power,
water supply and power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting stations and other similar
public services. ... (Emphasis supplied)

It appears to the Court that private respondent is properly characterized as a common carrier even
though he merely "back-hauled" goods for other merchants from Manila to Pangasinan, although
such back-hauling was done on a periodic or occasional rather than regular or scheduled manner,
and even though private respondent's principal occupation was not the carriage of goods for others.
There is no dispute that private respondent charged his customers a fee for hauling their goods; that
fee frequently fell below commercial freight rates is not relevant here.

The Court of Appeals referred to the fact that private respondent held no certificate of public
convenience, and concluded he was not a common carrier. This is palpable error. A certificate of
public convenience is not a requisite for the incurring of liability under the Civil Code provisions
governing common carriers. That liability arises the moment a person or firm acts as a common
carrier, without regard to whether or not such carrier has also complied with the requirements of the
applicable regulatory statute and implementing regulations and has been granted a certificate of
public convenience or other franchise. To exempt private respondent from the liabilities of a common
carrier because he has not secured the necessary certificate of public convenience, would be
offensive to sound public policy; that would be to reward private respondent precisely for failing to
comply with applicable statutory requirements. The business of a common carrier impinges directly
and intimately upon the safety and well being and property of those members of the general
community who happen to deal with such carrier. The law imposes duties and liabilities upon
common carriers for the safety and protection of those who utilize their services and the law cannot
allow a common carrier to render such duties and liabilities merely facultative by simply failing to
obtain the necessary permits and authorizations.

We turn then to the liability of private respondent as a common carrier.

Common carriers, "by the nature of their business and for reasons of public policy" 2 are held to a
very high degree of care and diligence ("extraordinary diligence") in the carriage of goods as well as
of passengers. The specific import of extraordinary diligence in the care of goods transported by a
common carrier is, according to Article 1733, "further expressed in Articles 1734,1735 and 1745,
numbers 5, 6 and 7" of the Civil Code.

Article 1734 establishes the general rule that common carriers are responsible for the loss,
destruction or deterioration of the goods which they carry, "unless the same is due to any of the
following causes only:

(1) Flood, storm, earthquake, lightning or other natural disaster or

calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character-of the goods or defects in the packing or-in the
containers; and
(5) Order or act of competent public authority.

It is important to point out that the above list of causes of loss, destruction or deterioration which
exempt the common carrier for responsibility therefor, is a closed list. Causes falling outside the
foregoing list, even if they appear to constitute a species of force majeure fall within the scope of
Article 1735, which provides as follows:

In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the preceding
article, if the goods are lost, destroyed or deteriorated, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that
they observed extraordinary diligence as required in Article 1733. (Emphasis
supplied)

Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause alleged in
the instant case — the hijacking of the carrier's truck — does not fall within any of the five (5)
categories of exempting causes listed in Article 1734. It would follow, therefore, that the hijacking of
the carrier's vehicle must be dealt with under the provisions of Article 1735, in other words, that the
private respondent as common carrier is presumed to have been at fault or to have acted
negligently. This presumption, however, may be overthrown by proof of extraordinary diligence on
the part of private respondent.

Petitioner insists that private respondent had not observed extraordinary diligence in the care of
petitioner's goods. Petitioner argues that in the circumstances of this case, private respondent
should have hired a security guard presumably to ride with the truck carrying the 600 cartons of
Liberty filled milk. We do not believe, however, that in the instant case, the standard of extraordinary
diligence required private respondent to retain a security guard to ride with the truck and to engage
brigands in a firelight at the risk of his own life and the lives of the driver and his helper.

The precise issue that we address here relates to the specific requirements of the duty of
extraordinary diligence in the vigilance over the goods carried in the specific context of hijacking or
armed robbery.

As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under Article
1733, given additional specification not only by Articles 1734 and 1735 but also by Article 1745,
numbers 4, 5 and 6, Article 1745 provides in relevant part:

Any of the following or similar stipulations shall be considered unreasonable, unjust

and contrary to public policy:

xxx xxx xxx

(5) that the common carrier shall not be responsible for the acts or
omissions of his or its employees;

(6) that the common carrier's liability for acts committed by thieves, or
of robbers who do not act with grave or irresistible threat, violence or
force, is dispensed with or diminished; and

(7) that the common carrier shall not responsible for the loss,
destruction or deterioration of goods on account of the defective
condition of the car vehicle, ship, airplane or other equipment used in
the contract of carriage. (Emphasis supplied)

Under Article 1745 (6) above, a common carrier is held responsible — and will not be allowed to
divest or to diminish such responsibility — even for acts of strangers like thieves or
robbers, except where such thieves or robbers in fact acted "with grave or irresistible threat, violence
or force." We believe and so hold that the limits of the duty of extraordinary diligence in the vigilance
over the goods carried are reached where the goods are lost as a result of a robbery which is
attended by "grave or irresistible threat, violence or force."

In the instant case, armed men held up the second truck owned by private respondent which carried
petitioner's cargo. The record shows that an information for robbery in band was filed in the Court of
First Instance of Tarlac, Branch 2, in Criminal Case No. 198 entitled "People of the Philippines v.
Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar Oria and one John Doe." There, the
accused were charged with willfully and unlawfully taking and carrying away with them the second
truck, driven by Manuel Estrada and loaded with the 600 cartons of Liberty filled milk destined for
delivery at petitioner's store in Urdaneta, Pangasinan. The decision of the trial court shows that the
accused acted with grave, if not irresistible, threat, violence or force.3 Three (3) of the five (5) hold-
uppers were armed with firearms. The robbers not only took away the truck and its cargo but also
kidnapped the driver and his helper, detaining them for several days and later releasing them in
another province (in Zambales). The hijacked truck was subsequently found by the police in Quezon
City. The Court of First Instance convicted all the accused of robbery, though not of robbery in
band. 4

In these circumstances, we hold that the occurrence of the loss must reasonably be regarded as
quite beyond the control of the common carrier and properly regarded as a fortuitous event. It is
necessary to recall that even common carriers are not made absolute insurers against all risks of
travel and of transport of goods, and are not held liable for acts or events which cannot be foreseen
or are inevitable, provided that they shall have complied with the rigorous standard of extraordinary
diligence.

We, therefore, agree with the result reached by the Court of Appeals that private respondent
Cendana is not liable for the value of the undelivered merchandise which was lost because of an
event entirely beyond private respondent's control.

ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the Decision of the
Court of Appeals dated 3 August 1977 is AFFIRMED. No pronouncement as to costs.

SO ORDERED.

Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concur.

Footnotes

1 Rollo, p. 14.

2 Article 1733, Civil Code.

3 Rollo, p. 22.

4 The evidence of the prosecution did not show that more than three (3) of the five
(5) hold-uppers were armed. Thus, the existence of a "band" within the technical
meaning of Article 306 of the Revised Penal Code, was not affirmatively proved by
the prosecution.
G.R. No. 125948 December 29, 1998

FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner,

vs.
COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN, BATANGAS CITY and
ADORACION C. ARELLANO, in her official capacity as City Treasurer of Batangas,
respondents.

MARTINEZ, J.:

This petition for review on certiorari assails the Decision of the Court of Appeals dated
November 29, 1995, in CA-G.R. SP No. 36801, affirming the decision of the Regional Trial
Court of Batangas City, Branch 84, in Civil Case No. 4293, which dismissed petitioners'
complaint for a business tax refund imposed by the City of Batangas.

Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to
contract, install and operate oil pipelines. The original pipeline concession was granted in
19671 and renewed by the Energy Regulatory Board in 1992. 2

Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the
Mayor of Batangas City. However, before the mayor's permit could be issued, the respondent
City Treasurer required petitioner to pay a local tax based on its gross receipts for the fiscal
year 1993 pursuant to the Local Government Code3. The respondent City Treasurer assessed
a business tax on the petitioner amounting to P956,076.04 payable in four installments based
on the gross receipts for products pumped at GPS-1 for the fiscal year 1993 which amounted
to P181,681,151.00. In order not to hamper its operations, petitioner paid the tax under protest
in the amount of P239,019.01 for the first quarter of 1993.

On January 20, 1994, petitioner filed a letter-protest addressed to the respondent City
Treasurer, the pertinent portion of which reads:

Please note that our Company (FPIC) is a pipeline operator with a government
concession granted under the Petroleum Act. It is engaged in the business of
transporting petroleum products from the Batangas refineries, via pipeline, to
Sucat and JTF Pandacan Terminals. As such, our Company is exempt from
paying tax on gross receipts under Section 133 of the Local Government Code
of 1991 . . . .

Moreover, Transportation contractors are not included in the enumeration of

contractors under Section 131, Paragraph (h) of the Local Government Code.
Therefore, the authority to impose tax "on contractors and other independent
contractors" under Section 143, Paragraph (e) of the Local Government Code
does not include the power to levy on transportation contractors.

The imposition and assessment cannot be categorized as a mere fee

authorized under Section 147 of the Local Government Code. The said section
limits the imposition of fees and charges on business to such amounts as may
be commensurate to the cost of regulation, inspection, and licensing. Hence,
assuming arguendo that FPIC is liable for the license fee, the imposition
thereof based on gross receipts is violative of the aforecited provision. The
 amount of P956,076.04 (P239,019.01 per quarter) is not commensurate to the
cost of regulation, inspection and licensing. The fee is already a revenue
raising measure, and not a mere regulatory imposition.4

On March 8, 1994, the respondent City Treasurer denied the protest contending that
petitioner cannot be considered engaged in transportation business, thus it cannot claim
exemption under Section 133 (j) of the Local Government Code.5

On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a
complaint6 for tax refund with prayer for writ of preliminary injunction against respondents
City of Batangas and Adoracion Arellano in her capacity as City Treasurer. In its complaint,
petitioner alleged, inter alia, that: (1) the imposition and collection of the business tax on its
gross receipts violates Section 133 of the Local Government Code; (2) the authority of cities
to impose and collect a tax on the gross receipts of "contractors and independent
contractors" under Sec. 141 (e) and 151 does not include the authority to collect such taxes
on transportation contractors for, as defined under Sec. 131 (h), the term "contractors"
excludes transportation contractors; and, (3) the City Treasurer illegally and erroneously
imposed and collected the said tax, thus meriting the immediate refund of the tax paid.7

Traversing the complaint, the respondents argued that petitioner cannot be exempt from
taxes under Section 133 (j) of the Local Government Code as said exemption applies only to
"transportation contractors and persons engaged in the transportation by hire and common
carriers by air, land and water." Respondents assert that pipelines are not included in the
term "common carrier" which refers solely to ordinary carriers such as trucks, trains, ships
and the like. Respondents further posit that the term "common carrier" under the said code
pertains to the mode or manner by which a product is delivered to its destination.8

On October 3, 1994, the trial court rendered a decision dismissing the complaint, ruling in
this wise:

. . . Plaintiff is either a contractor or other independent contractor.

. . . the exemption to tax claimed by the plaintiff has become unclear. It is a rule
that tax exemptions are to be strictly construed against the taxpayer, taxes
being the lifeblood of the government. Exemption may therefore be granted
only by clear and unequivocal provisions of law.

Plaintiff claims that it is a grantee of a pipeline concession under Republic Act

387. (Exhibit A) whose concession was lately renewed by the Energy
Regulatory Board (Exhibit B). Yet neither said law nor the deed of concession
grant any tax exemption upon the plaintiff.

Even the Local Government Code imposes a tax on franchise holders under
Sec. 137 of the Local Tax Code. Such being the situation obtained in this case
(exemption being unclear and equivocal) resort to distinctions or other
considerations may be of help:

1. That the exemption granted under Sec. 133 (j)

encompasses only common carriers so as not to
overburden the riding public or commuters with
taxes. Plaintiff is not a common carrier, but a
special carrier extending its services and facilities
 to a single specific or "special customer" under a
"special contract."

2. The Local Tax Code of 1992 was basically

enacted to give more and effective local
autonomy to local governments than the previous
enactments, to make them economically and
financially viable to serve the people and
discharge their functions with a concomitant
obligation to accept certain devolution of powers,
. . . So, consistent with this policy even franchise
grantees are taxed (Sec. 137) and contractors are
also taxed under Sec. 143 (e) and 151 of the
Code.9

Petitioner assailed the aforesaid decision before this Court via a petition for review. On
February 27, 1995, we referred the case to the respondent Court of Appeals for consideration
and adjudication. 10 On November 29, 1995, the respondent court rendered a
decision 11 affirming the trial court's dismissal of petitioner's complaint. Petitioner's motion
for reconsideration was denied on July 18, 1996. 12

Hence, this petition. At first, the petition was denied due course in a Resolution dated
November 11, 1996. 13 Petitioner moved for a reconsideration which was granted by this Court
in a Resolution 14 of January 22, 1997. Thus, the petition was reinstated.

Petitioner claims that the respondent Court of Appeals erred in holding that (1) the petitioner
is not a common carrier or a transportation contractor, and (2) the exemption sought for by
petitioner is not clear under the law.

There is merit in the petition.

A "common carrier" may be defined, broadly, as one who holds himself out to the public as
engaged in the business of transporting persons or property from place to place, for
compensation, offering his services to the public generally.

Art. 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or
association engaged in the business of carrying or transporting passengers or goods or
both, by land, water, or air, for compensation, offering their services to the public."

The test for determining whether a party is a common carrier of goods is:

1. He must be engaged in the business of carrying

goods for others as a public employment, and
must hold himself out as ready to engage in the
transportation of goods for person generally as a
business and not as a casual occupation;

2. He must undertake to carry goods of the kind to

which his business is confined;
 3. He must undertake to carry by the method by
which his business is conducted and over his
established roads; and

4. The transportation must be for hire. 15

Based on the above definitions and requirements, there is no doubt that petitioner is a
common carrier. It is engaged in the business of transporting or carrying goods, i.e.
petroleum products, for hire as a public employment. It undertakes to carry for all persons
indifferently, that is, to all persons who choose to employ its services, and transports the
goods by land and for compensation. The fact that petitioner has a limited clientele does not
exclude it from the definition of a common carrier. In De Guzman vs. Court of Appeals 16 we
ruled that:

The above article (Art. 1732, Civil Code) makes no distinction

between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only
as an ancillary activity (in local idiom, as a "sideline"). Article
1732 . . . avoids making any distinction between a person or
enterprise offering transportation service on
a regular or scheduled basis and one offering such service on
an occasional, episodic or unscheduled basis. Neither does
Article 1732 distinguish between a carrier offering its services to
the "general public," i.e., the general community or population,
and one who offers services or solicits business only from a
narrow segment of the general population. We think that Article
1877 deliberately refrained from making such distinctions.

So understood, the concept of "common carrier" under Article

1732 may be seen to coincide neatly with the notion of "public
service," under the Public Service Act (Commonwealth Act No.
1416, as amended) which at least partially supplements the law
on common carriers set forth in the Civil Code. Under Section
13, paragraph (b) of the Public Service Act, "public service"
includes:

every person that now or hereafter may own,

operate. manage, or control in the Philippines, for
hire or compensation, with general or limited
clientele, whether permanent, occasional or
accidental, and done for general business
purposes, any common carrier, railroad, street
railway, traction railway, subway motor vehicle,
either for freight or passenger, or both, with or
without fixed route and whatever may be its
classification, freight or carrier service of any
class, express service, steamboat, or steamship
line, pontines, ferries and water craft, engaged in
the transportation of passengers or freight or
both, shipyard, marine repair shop, wharf or dock,
ice plant, ice-refrigeration plant, canal, irrigation
system gas, electric light heat and power, water
 supply and power petroleum, sewerage system,
wire or wireless communications systems, wire or
wireless broadcasting stations and other similar
public services. (Emphasis Supplied)

Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the
Local Government Code refers only to common carriers transporting goods and passengers
through moving vehicles or vessels either by land, sea or water, is erroneous.

As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code
makes no distinction as to the means of transporting, as long as it is by land, water or air. It
does not provide that the transportation of the passengers or goods should be by motor
vehicle. In fact, in the United States, oil pipe line operators are considered common carriers. 17

Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a
"common carrier." Thus, Article 86 thereof provides that:

Art. 86. Pipe line concessionaire as common carrier. — A pipe

line shall have the preferential right to utilize installations for the
transportation of petroleum owned by him, but is obligated to
utilize the remaining transportation capacity pro rata for the
transportation of such other petroleum as may be offered by
others for transport, and to charge without discrimination such
rates as may have been approved by the Secretary of
Agriculture and Natural Resources.

Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of
Article 7 thereof provides:

that everything relating to the exploration for and exploitation of

petroleum . . . and everything relating to the manufacture,
refining, storage, or transportation by special methods of
petroleum, is hereby declared to be a public utility. (Emphasis
Supplied)

The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR
Ruling No. 069-83, it declared:

. . . since [petitioner] is a pipeline concessionaire that is

engaged only in transporting petroleum products, it is
considered a common carrier under Republic Act No. 387 . . . .
Such being the case, it is not subject to withholding tax
prescribed by Revenue Regulations No. 13-78, as amended.

From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" and,
therefore, exempt from the business tax as provided for in Section 133 (j), of the Local
Government Code, to wit:

Sec. 133. Common Limitations on the Taxing Powers of Local

Government Units. — Unless otherwise provided herein, the
exercise of the taxing powers of provinces, cities, municipalities,
and barangays shall not extend to the levy of the following:
 xxx xxx xxx

(j) Taxes on the gross receipts of

transportation contractors and
persons engaged in the
transportation of passengers or
freight by hire and common carriers
by air, land or water, except as
provided in this Code.

The deliberations conducted in the House of Representatives on the Local Government Code
of 1991 are illuminating:

MR. AQUINO (A). Thank you, Mr. Speaker.

Mr. Speaker, we would like to proceed to page 95, line

1. It states: "SEC. 121 [now Sec. 131]. Common Limitations on

the Taxing Powers of Local Government Units." . . .

MR. AQUINO (A.). Thank you Mr. Speaker.

Still on page 95, subparagraph 5, on taxes on the business of

transportation. This appears to be one of those being deemed to
be exempted from the taxing powers of the local government
units. May we know the reason why the transportation business
is being excluded from the taxing powers of the local
government units?

MR. JAVIER (E.). Mr. Speaker, there is an exception contained in

Section 121 (now Sec. 131), line 16, paragraph 5. It states that
local government units may not impose taxes on the business of
transportation, except as otherwise provided in this code.

Now, Mr. Speaker, if the Gentleman would care to go to page 98

of Book II, one can see there that provinces have the power to
impose a tax on business enjoying a franchise at the rate of not
more than one-half of 1 percent of the gross annual receipts. So,
transportation contractors who are enjoying a franchise would
be subject to tax by the province. That is the exception, Mr.
Speaker.

What we want to guard against here, Mr. Speaker, is the

imposition of taxes by local government units on the carrier
business. Local government units may impose taxes on top of
what is already being imposed by the National Internal Revenue
Code which is the so-called "common carriers tax." We do not
want a duplication of this tax, so we just provided for an
exception under Section 125 [now Sec. 137] that a province may
impose this tax at a specific rate.
 MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. . .
. 18

It is clear that the legislative intent in excluding from the taxing power of the local
government unit the imposition of business tax against common carriers is to prevent a
duplication of the so-called "common carrier's tax."

Petitioner is already paying three (3%) percent common carrier's tax on its gross
sales/earnings under the National Internal Revenue Code. 19 To tax petitioner again on its
gross receipts in its transportation of petroleum business would defeat the purpose of the
Local Government Code.

WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of
Appeals dated November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED and SET ASIDE.

SO ORDERED.

Bellosillo, Puno and Mendoza, JJ., concur.

Footnotes

1 Rollo, pp. 90-94.

2 Decision of the Energy Regulatory Board in ERB Case No. 92-94, renewing
the Pipeline Concession of petitioner First Philippine Industrial Corporation,
formerly known as Meralco Securities Industrial Corporation. (Rollo, pp. 95-
100).

3 Sec. 143. Tax on Business. The municipality may impose taxes on the
following business:

xxx xxx xxx

(e) On contractors and other independent contractors, in accordance with the

following schedule:

With gross receipts for the preceding Amount of Tax Per Annum

calendar year in the amount of

......

P2, 000,000.00 or more at a rate not exceeding fifty

percent (50%) of one percent (1%)

4 Letter Protest dated January 20, 1994, Rollo, pp. 110-111.

5 Letter of respondent City Treasurer, Rollo, p. 112.

6 Complaint, Annex "C", Rollo, pp. 51-56.

7 Rollo, pp. 51-57.

8 Answer, Annex "J", Rollo, pp. 122-127.

9 RTC Decision, Rollo, pp. 58-62.

10 Rollo, p. 84.

11 CA-G.R. SP No. 36801; Penned by Justice Jose C. De la Rama and

concurred in by Justice Jaime M. Lantin and Justice Eduardo G.
Montenegro; Rollo, pp. 33-47.

12 Rollo, p. 49.

13 Resolution dated November 11, 1996 excerpts of which are hereunder

quoted:

"The petition is unmeritorious

"As correctly ruled by respondent appellate court, petitioner is not a common

carrier as it is not offering its services to the public.

"Art. 1732 of the Civil Code defines Common Carriers as: persons,
corporations, firm or association engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public.

"We sustain the view that petitioner is a special carrier. Based on the facts on
hand, it appears that petitioner is not offering its services to the public.

"We agree with the findings of the appellate court that the claim for exemption
from taxation must be strictly construed against the taxpayer. The present
understanding of the concept of "common carries" does not include carriers of
petroleum using pipelines. It is highly unconventional to say that the business
of transporting petroleum through pipelines involves "common carrier"
business. The Local Government Code intended to give exemptions from local
taxation to common carriers transporting goods and passengers through
moving vehicles or vessels and not through pipelines. The term common
carrier under Section 133 (j) of the Local Government Code must be given its
simple and ordinary or generally accepted meaning which definitely not
include operators of pipelines."

14 G.R. No. 125948 (First Philippine Industrial Corporation vs. Court of

Appeals, et. al.) — Considering the grounds of the motion for reconsideration,
dated December 23, 1996, filed by counsel for petitioner, of the resolution of
November 11, 1996 which denied the petition for review on certiorari, the Court
Resolved:
(a) to GRANT the motion for reconsideration and to REINSTATE the petition;
and

(b) to require respondent to COMMENT on the petition, within ten (10) days
from notice.

15 Agbayani, Commercial Laws of the Phil., 1983 Ed., Vol. 4, p. 5.

16 168 SCRA 617-618 [1988].

17 Giffin v. Pipe Lines, 172 Pa. 580, 33 Alt. 578; Producer Transp. Co. v.
Railroad Commission, 241 US 228, 64 L ed 239, 40 S Ct 131.

18 Journal and Record of the House of Representatives, Fourth Regular

Session, Volume 2, pp. 87-89, September 6, 1990; Emphasis Ours.

19 Annex "D" of Petition, Rollo, pp. 101-109.

G.R. No. 147246 August 19, 2003

ASIA LIGHTERAGE AND SHIPPING, INC., petitioner,

vs.
COURT OF APPEALS and PRUDENTIAL GUARANTEE AND ASSURANCE, INC., respondents.

PUNO, J.:

On appeal is the Court of Appeals' May 11, 2000 Decision1 in CA-G.R. CV No. 49195 and February
21, 2001 Resolution2 affirming with modification the April 6, 1994 Decision3 of the Regional Trial
Court of Manila which found petitioner liable to pay private respondent the amount of indemnity and
attorney's fees.

First, the facts.

On June 13, 1990, 3,150 metric tons of Better Western White Wheat in bulk, valued at
US$423,192.354 was shipped by Marubeni American Corporation of Portland, Oregon on board the
vessel M/V NEO CYMBIDIUM V-26 for delivery to the consignee, General Milling Corporation in
Manila, evidenced by Bill of Lading No. PTD/Man-4.5 The shipment was insured by the private
respondent Prudential Guarantee and Assurance, Inc. against loss or damage for P14,621,771.75
under Marine Cargo Risk Note RN 11859/90.6

On July 25, 1990, the carrying vessel arrived in Manila and the cargo was transferred to the custody
of the petitioner Asia Lighterage and Shipping, Inc. The petitioner was contracted by the consignee
as carrier to deliver the cargo to consignee's warehouse at Bo. Ugong, Pasig City.

On August 15, 1990, 900 metric tons of the shipment was loaded on barge PSTSI III, evidenced by
Lighterage Receipt No. 03647 for delivery to consignee. The cargo did not reach its destination.

It appears that on August 17, 1990, the transport of said cargo was suspended due to a warning of
an incoming typhoon. On August 22, 1990, the petitioner proceeded to pull the barge to Engineering
Island off Baseco to seek shelter from the approaching typhoon. PSTSI III was tied down to other
barges which arrived ahead of it while weathering out the storm that night. A few days after, the
barge developed a list because of a hole it sustained after hitting an unseen protuberance
underneath the water. The petitioner filed a Marine Protest on August 28, 1990.8 It likewise secured
the services of Gaspar Salvaging Corporation which refloated the barge.9 The hole was then patched
with clay and cement.

The barge was then towed to ISLOFF terminal before it finally headed towards the consignee's wharf
on September 5, 1990. Upon reaching the Sta. Mesa spillways, the barge again ran aground due to
strong current. To avoid the complete sinking of the barge, a portion of the goods was transferred to
three other barges.10

The next day, September 6, 1990, the towing bits of the barge broke. It sank completely, resulting in
the total loss of the remaining cargo.11 A second Marine Protest was filed on September 7, 1990.12

On September 14, 1990, a bidding was conducted to dispose of the damaged wheat retrieved and
loaded on the three other barges.13 The total proceeds from the sale of the salvaged cargo
was P201,379.75.14
On the same date, September 14, 1990, consignee sent a claim letter to the petitioner, and another
letter dated September 18, 1990 to the private respondent for the value of the lost cargo.

On January 30, 1991, the private respondent indemnified the consignee in the amount
of P4,104,654.22.15 Thereafter, as subrogee, it sought recovery of said amount from the petitioner,
but to no avail.

On July 3, 1991, the private respondent filed a complaint against the petitioner for recovery of the
amount of indemnity, attorney's fees and cost of suit.16 Petitioner filed its answer with counterclaim.17

The Regional Trial Court ruled in favor of the private respondent. The dispositive portion of its
Decision states:

WHEREFORE, premises considered, judgment is hereby rendered ordering defendant Asia

Lighterage & Shipping, Inc. liable to pay plaintiff Prudential Guarantee & Assurance Co., Inc.
the sum of P4,104,654.22 with interest from the date complaint was filed on July 3, 1991 until
fully satisfied plus 10% of the amount awarded as and for attorney's fees. Defendant's
counterclaim is hereby DISMISSED. With costs against defendant.18

Petitioner appealed to the Court of Appeals insisting that it is not a common carrier. The appellate
court affirmed the decision of the trial court with modification. The dispositive portion of its decision
reads:

WHEREFORE, the decision appealed from is hereby AFFIRMED with modification in the
sense that the salvage value of P201,379.75 shall be deducted from the amount
of P4,104,654.22. Costs against appellant.

SO ORDERED.

Petitioner's Motion for Reconsideration dated June 3, 2000 was likewise denied by the appellate
court in a Resolution promulgated on February 21, 2001.

Hence, this petition. Petitioner submits the following errors allegedly committed by the appellate
court, viz:19

(1) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD
WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT
WHEN IT HELD THAT PETITIONER IS A COMMON CARRIER.

(2) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD
WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT
WHEN IT AFFIRMED THE FINDING OF THE LOWER COURT A QUO THAT ON THE
BASIS OF THE PROVISIONS OF THE CIVIL CODE APPLICABLE TO COMMON
CARRIERS, "THE LOSS OF THE CARGO IS, THEREFORE, BORNE BY THE CARRIER IN
ALL CASES EXCEPT IN THE FIVE (5) CASES ENUMERATED."

(3) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD
WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT
WHEN IT EFFECTIVELY CONCLUDED THAT PETITIONER FAILED TO EXERCISE DUE
DILIGENCE AND/OR WAS NEGLIGENT IN ITS CARE AND CUSTODY OF THE
CONSIGNEE'S CARGO.
The issues to be resolved are:

(1) Whether the petitioner is a common carrier; and,

(2) Assuming the petitioner is a common carrier, whether it exercised extraordinary diligence
in its care and custody of the consignee's cargo.

On the first issue, we rule that petitioner is a common carrier.

Article 1732 of the Civil Code defines common carriers as persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air, for compensation, offering their services to the public.

Petitioner contends that it is not a common carrier but a private carrier. Allegedly, it has no fixed and
publicly known route, maintains no terminals, and issues no tickets. It points out that it is not obliged
to carry indiscriminately for any person. It is not bound to carry goods unless it consents. In short, it
does not hold out its services to the general public.20

We disagree.

In De Guzman vs. Court of Appeals,21 we held that the definition of common carriers in Article
1732 of the Civil Code makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an ancillary activity.
We also did not distinguish between a person or enterprise offering transportation service on a
regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled
basis. Further, we ruled that Article 1732 does not distinguish between a carrier offering its services
to the general public, and one who offers services or solicits business only from a narrow segment of
the general population.

In the case at bar, the principal business of the petitioner is that of lighterage and drayage22 and it
offers its barges to the public for carrying or transporting goods by water for compensation.
Petitioner is clearly a common carrier. In De Guzman, supra,23 we considered private respondent
Ernesto Cendaña to be a common carrier even if his principal occupation was not the carriage of
goods for others, but that of buying used bottles and scrap metal in Pangasinan and selling these
items in Manila.

We therefore hold that petitioner is a common carrier whether its carrying of goods is done on an
irregular rather than scheduled manner, and with an only limited clientele. A common carrier need
not have fixed and publicly known routes. Neither does it have to maintain terminals or issue tickets.

To be sure, petitioner fits the test of a common carrier as laid down in Bascos vs. Court of
Appeals.24 The test to determine a common carrier is "whether the given undertaking is a part of the
business engaged in by the carrier which he has held out to the general public as his occupation
rather than the quantity or extent of the business transacted."25 In the case at bar, the petitioner
admitted that it is engaged in the business of shipping and lighterage,26 offering its barges to the
public, despite its limited clientele for carrying or transporting goods by water for compensation.27

On the second issue, we uphold the findings of the lower courts that petitioner failed to exercise
extraordinary diligence in its care and custody of the consignee's goods.
Common carriers are bound to observe extraordinary diligence in the vigilance over the goods
transported by them.28 They are presumed to have been at fault or to have acted negligently if the
goods are lost, destroyed or deteriorated.29 To overcome the presumption of negligence in the case
of loss, destruction or deterioration of the goods, the common carrier must prove that it exercised
extraordinary diligence. There are, however, exceptions to this rule. Article 1734 of the Civil Code
enumerates the instances when the presumption of negligence does not attach:

Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the
goods, unless the same is due to any of the following causes only:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

(2) Act of the public enemy in war, whether international or civil;

(3) Act or omission of the shipper or owner of the goods;

(4) The character of the goods or defects in the packing or in the containers;

(5) Order or act of competent public authority.

In the case at bar, the barge completely sank after its towing bits broke, resulting in the total loss of
its cargo. Petitioner claims that this was caused by a typhoon, hence, it should not be held liable for
the loss of the cargo. However, petitioner failed to prove that the typhoon is the proximate and only
cause of the loss of the goods, and that it has exercised due diligence before, during and after the
occurrence of the typhoon to prevent or minimize the loss.30 The evidence show that, even before
the towing bits of the barge broke, it had already previously sustained damage when it hit a sunken
object while docked at the Engineering Island. It even suffered a hole. Clearly, this could not be
solely attributed to the typhoon. The partly-submerged vessel was refloated but its hole was patched
with only clay and cement. The patch work was merely a provisional remedy, not enough for the
barge to sail safely. Thus, when petitioner persisted to proceed with the voyage, it recklessly
exposed the cargo to further damage. A portion of the cross-examination of Alfredo Cunanan, cargo-
surveyor of Tan-Gatue Adjustment Co., Inc., states:

CROSS-EXAMINATION BY ATTY. DONN LEE:31

xxx xxx xxx

q - Can you tell us what else transpired after that incident?

a - After the first accident, through the initiative of the barge owners, they tried to pull
out the barge from the place of the accident, and bring it to the anchor terminal for safety,
then after deciding if the vessel is stabilized, they tried to pull it to the consignee's
warehouse, now while on route another accident occurred, now this time the barge totally
hitting something in the course.

q - You said there was another accident, can you tell the court the nature of the second
accident?

a - The sinking, sir.

 q - Can you tell the nature . . . can you tell the court, if you know what caused the
sinking?

a - Mostly it was related to the first accident because there was already a whole (sic) on
the bottom part of the barge.

xxx xxx xxx

This is not all. Petitioner still headed to the consignee's wharf despite knowledge of an incoming
typhoon. During the time that the barge was heading towards the consignee's wharf on September
5, 1990, typhoon "Loleng" has already entered the Philippine area of responsibility.32 A part of the
testimony of Robert Boyd, Cargo Operations Supervisor of the petitioner, reveals:

DIRECT-EXAMINATION BY ATTY. LEE:33

xxx xxx xxx

q - Now, Mr. Witness, did it not occur to you it might be safer to just allow the Barge to
lie where she was instead of towing it?

a - Since that time that the Barge was refloated, GMC (General Milling Corporation, the
consignee) as I have said was in a hurry for their goods to be delivered at their Wharf since
they needed badly the wheat that was loaded in PSTSI-3. It was needed badly by the
consignee.

q - And this is the reason why you towed the Barge as you did?

a - Yes, sir.

xxx xxx xxx

CROSS-EXAMINATION BY ATTY. IGNACIO:34

xxx xxx xxx

q - And then from ISLOFF Terminal you proceeded to the premises of the GMC? Am I
correct?

a - The next day, in the morning, we hired for additional two (2) tugboats as I have
stated.

q - Despite of the threats of an incoming typhoon as you testified a while ago?

a - It is already in an inner portion of Pasig River. The typhoon would be coming and it
would be dangerous if we are in the vicinity of Manila Bay.

q - But the fact is, the typhoon was incoming? Yes or no?

a - Yes.
 q - And yet as a standard operating procedure of your Company, you have to secure a
sort of Certification to determine the weather condition, am I correct?

a - Yes, sir.

q - So, more or less, you had the knowledge of the incoming typhoon, right?

a - Yes, sir.

q - And yet you proceeded to the premises of the GMC?

a - ISLOFF Terminal is far from Manila Bay and anytime even with the typhoon if you
are already inside the vicinity or inside Pasig entrance, it is a safe place to tow upstream.

Accordingly, the petitioner cannot invoke the occurrence of the typhoon as force majeure to escape
liability for the loss sustained by the private respondent. Surely, meeting a typhoon head-on falls
short of due diligence required from a common carrier. More importantly, the officers/employees
themselves of petitioner admitted that when the towing bits of the vessel broke that caused its
sinking and the total loss of the cargo upon reaching the Pasig River, it was no longer affected by
the typhoon. The typhoon then is not the proximate cause of the loss of the cargo; a human
factor, i.e., negligence had intervened.

IN VIEW THEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV
No. 49195 dated May 11, 2000 and its Resolution dated February 21, 2001 are hereby AFFIRMED.
Costs against petitioner.

SO ORDERED.

Panganiban, and Sandoval-Gutierrez, JJ., concur.

Corona, and Carpio-Morales, JJ., on official leave.

Footnotes

1 Rollo, pp. 49-59.

2 Id., p. 61.

3 Id., pp. 71-73.

4 Exhibit "B," Records, p. 91.

5 Exhibit "A," id., p. 90.

6 Exhibits "I" and "I-1," id., pp. 107-108.

7 Exhibit "C," id., p. 92.

8 Exhibit "4," id., p. 144.

9 Exhibits "G-1" and "1-A," id., p. 100.

10 Exhibits "G-2" and "1-B," id., p. 101.

11 Ibid.

12 Exhibit "5," Records, p. 145.

13 Supra note 10.

14 Exhibits "G-3" and "1-C," Records, p. 102.

15 Exhibit "L," id., p. 110.

16 Id., pp. 1-4.

17 Id., pp. 21-22.

18 Id., p. 172.

19 Rollo, p. 22.

20 Id., pp. 147-150.

21 G.R. No. L-47822, 22 December 1988.

22 Rollo, p. 127.

23 See note 21.

24 G.R. No. 101089, 07 April 1993, 221 SCRA 318.

25 Id., pp. 323-324.

26 Rollo, p. 14.

27 Id., pp. 148-150.

28 Article 1733, Civil Code. Common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary diligence in the vigilance over
the goods and for the safety of the passengers transported by them, according to all the
circumstances of each case.

Such extraordinary diligence in vigilance over the goods is further expressed in articles 1734,
1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the
passengers is further set forth in articles 1755 and 1756.
29Article 1735, Civil Code. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of
the preceding article, if the goods are lost, destroyed or deteriorated, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that they
observed extraordinary diligence as required in article 1733.

30Article 1739, Civil Code. In order that the common carrier may be exempted from
responsibility, the natural disaster must have been the proximate and only cause of the loss.
However, the common carrier must exercise due diligence to prevent or minimize the loss
before, during and after the occurrence of flood, storm or other natural disaster in order that
the common carrier may be exempted from liability for the loss, destruction, or deterioration
of the goods. The same duty is incumbent upon the common carrier in case of an act of the
public enemy referred to in article 1734, no. 2.

31 TSN, 04 March 1993, pp. 12-13.

Certification dated 02 August 1991 issued by the Philippine Atmospheric Geophysical &
32

Astronomical Services Administration (PAGASA), Exhibit "7," Records, p. 147.

33 TSN, 09 March 1993, pp. 70-71.

34 Id., pp. 76-77.

G.R. No. 145804 February 6, 2003

LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN, petitioners,

vs.
MARJORIE NAVIDAD, Heirs of the Late NICANOR NAVIDAD & PRUDENT SECURITY
AGENCY, respondents.

DECISION

VITUG, J.:

The case before the Court is an appeal from the decision and resolution of the Court of Appeals,
promulgated on 27 April 2000 and 10 October 2000, respectively, in CA-G.R. CV No. 60720, entitled
"Marjorie Navidad and Heirs of the Late Nicanor Navidad vs. Rodolfo Roman, et. al.," which has
modified the decision of 11 August 1998 of the Regional Trial Court, Branch 266, Pasig City,
exonerating Prudent Security Agency (Prudent) from liability and finding Light Rail Transit Authority
(LRTA) and Rodolfo Roman liable for damages on account of the death of Nicanor Navidad.

On 14 October 1993, about half an hour past seven o’clock in the evening, Nicanor Navidad, then
drunk, entered the EDSA LRT station after purchasing a "token" (representing payment of the fare).
While Navidad was standing on the platform near the LRT tracks, Junelito Escartin, the security
guard assigned to the area approached Navidad. A misunderstanding or an altercation between the
two apparently ensued that led to a fist fight. No evidence, however, was adduced to indicate how
the fight started or who, between the two, delivered the first blow or how Navidad later fell on the
LRT tracks. At the exact moment that Navidad fell, an LRT train, operated by petitioner Rodolfo
Roman, was coming in. Navidad was struck by the moving train, and he was killed instantaneously.

On 08 December 1994, the widow of Nicanor, herein respondent Marjorie Navidad, along with her
children, filed a complaint for damages against Junelito Escartin, Rodolfo Roman, the LRTA, the
Metro Transit Organization, Inc. (Metro Transit), and Prudent for the death of her husband. LRTA
and Roman filed a counterclaim against Navidad and a cross-claim against Escartin and Prudent.
Prudent, in its answer, denied liability and averred that it had exercised due diligence in the selection
and supervision of its security guards.

The LRTA and Roman presented their evidence while Prudent and Escartin, instead of presenting
evidence, filed a demurrer contending that Navidad had failed to prove that Escartin was negligent in
his assigned task. On 11 August 1998, the trial court rendered its decision; it adjudged:

"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants
Prudent Security and Junelito Escartin ordering the latter to pay jointly and severally the plaintiffs the
following:

"a) 1) Actual damages of P44,830.00;

2) Compensatory damages of P443,520.00;

3) Indemnity for the death of Nicanor Navidad in the sum of P50,000.00;

"b) Moral damages of P50,000.00;

"c) Attorney’s fees of P20,000;

 "d) Costs of suit.

"The complaint against defendants LRTA and Rodolfo Roman are dismissed for lack of merit.

"The compulsory counterclaim of LRTA and Roman are likewise dismissed."1

Prudent appealed to the Court of Appeals. On 27 August 2000, the appellate court promulgated its
now assailed decision exonerating Prudent from any liability for the death of Nicanor Navidad and,
instead, holding the LRTA and Roman jointly and severally liable thusly:

"WHEREFORE, the assailed judgment is hereby MODIFIED, by exonerating the appellants from any
liability for the death of Nicanor Navidad, Jr. Instead, appellees Rodolfo Roman and the Light Rail
Transit Authority (LRTA) are held liable for his death and are hereby directed to pay jointly and
severally to the plaintiffs-appellees, the following amounts:

a) P44,830.00 as actual damages;

b) P50,000.00 as nominal damages;

c) P50,000.00 as moral damages;

d) P50,000.00 as indemnity for the death of the deceased; and

e) P20,000.00 as and for attorney’s fees."2

The appellate court ratiocinated that while the deceased might not have then as yet boarded the
train, a contract of carriage theretofore had already existed when the victim entered the place where
passengers were supposed to be after paying the fare and getting the corresponding token therefor.
In exempting Prudent from liability, the court stressed that there was nothing to link the security
agency to the death of Navidad. It said that Navidad failed to show that Escartin inflicted fist blows
upon the victim and the evidence merely established the fact of death of Navidad by reason of his
having been hit by the train owned and managed by the LRTA and operated at the time by Roman.
The appellate court faulted petitioners for their failure to present expert evidence to establish the fact
that the application of emergency brakes could not have stopped the train.

The appellate court denied petitioners’ motion for reconsideration in its resolution of 10 October
2000.

In their present recourse, petitioners recite alleged errors on the part of the appellate court; viz:

"I.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED BY DISREGARDING THE

FINDINGS OF FACTS BY THE TRIAL COURT

"II.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT PETITIONERS

ARE LIABLE FOR THE DEATH OF NICANOR NAVIDAD, JR.
 "III.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RODOLFO

ROMAN IS AN EMPLOYEE OF LRTA."3

Petitioners would contend that the appellate court ignored the evidence and the factual findings of
the trial court by holding them liable on the basis of a sweeping conclusion that the presumption of
negligence on the part of a common carrier was not overcome. Petitioners would insist that
Escartin’s assault upon Navidad, which caused the latter to fall on the tracks, was an act of a
stranger that could not have been foreseen or prevented. The LRTA would add that the appellate
court’s conclusion on the existence of an employer-employee relationship between Roman and
LRTA lacked basis because Roman himself had testified being an employee of Metro Transit and
not of the LRTA.

Respondents, supporting the decision of the appellate court, contended that a contract of carriage
was deemed created from the moment Navidad paid the fare at the LRT station and entered the
premises of the latter, entitling Navidad to all the rights and protection under a contractual relation,
and that the appellate court had correctly held LRTA and Roman liable for the death of Navidad in
failing to exercise extraordinary diligence imposed upon a common carrier.

Law and jurisprudence dictate that a common carrier, both from the nature of its business and for
reasons of public policy, is burdened with the duty of exercising utmost diligence in ensuring the
safety of passengers.4 The Civil Code, governing the liability of a common carrier for death of or
injury to its passengers, provides:

"Article 1755. A common carrier is bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all
the circumstances.

"Article 1756. In case of death of or injuries to passengers, common carriers are presumed to have
been at fault or to have acted negligently, unless they prove that they observed extraordinary
diligence as prescribed in articles 1733 and 1755."

"Article 1759. Common carriers are liable for the death of or injuries to passengers through the
negligence or willful acts of the former’s employees, although such employees may have acted
beyond the scope of their authority or in violation of the orders of the common carriers.

"This liability of the common carriers does not cease upon proof that they exercised all the diligence
of a good father of a family in the selection and supervision of their employees."

"Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of the
willful acts or negligence of other passengers or of strangers, if the common carrier’s employees
through the exercise of the diligence of a good father of a family could have prevented or stopped
the act or omission."

The law requires common carriers to carry passengers safely using the utmost diligence of very
cautious persons with due regard for all circumstances.5 Such duty of a common carrier to provide
safety to its passengers so obligates it not only during the course of the trip but for so long as the
passengers are within its premises and where they ought to be in pursuance to the contract of
carriage.6 The statutory provisions render a common carrier liable for death of or injury to passengers
(a) through the negligence or wilful acts of its employees or b) on account of wilful acts or negligence
of other passengers or of strangers if the common carrier’s employees through the exercise of due
diligence could have prevented or stopped the act or omission.7 In case of such death or injury, a
carrier is presumed to have been at fault or been negligent, and8 by simple proof of injury, the
passenger is relieved of the duty to still establish the fault or negligence of the carrier or of its
employees and the burden shifts upon the carrier to prove that the injury is due to an unforeseen
event or to force majeure.9 In the absence of satisfactory explanation by the carrier on how the
accident occurred, which petitioners, according to the appellate court, have failed to show, the
presumption would be that it has been at fault,10 an exception from the general rule that negligence
must be proved.11

The foundation of LRTA’s liability is the contract of carriage and its obligation to indemnify the victim
arises from the breach of that contract by reason of its failure to exercise the high diligence required
of the common carrier. In the discharge of its commitment to ensure the safety of passengers, a
carrier may choose to hire its own employees or avail itself of the services of an outsider or an
independent firm to undertake the task. In either case, the common carrier is not relieved of its
responsibilities under the contract of carriage.

Should Prudent be made likewise liable? If at all, that liability could only be for tort under the
provisions of Article 217612 and related provisions, in conjunction with Article 2180,13 of the Civil Code.
The premise, however, for the employer’s liability is negligence or fault on the part of the employee.
Once such fault is established, the employer can then be made liable on the basis of the
presumption juris tantum that the employer failed to exercise diligentissimi patris families in the
selection and supervision of its employees. The liability is primary and can only be negated by
showing due diligence in the selection and supervision of the employee, a factual matter that has not
been shown. Absent such a showing, one might ask further, how then must the liability of the
common carrier, on the one hand, and an independent contractor, on the other hand, be described?
It would be solidary. A contractual obligation can be breached by tort and when the same act or
omission causes the injury, one resulting in culpa contractual and the other in culpa aquiliana, Article
219414 of the Civil Code can well apply.15 In fine, a liability for tort may arise even under a contract,
where tort is that which breaches the contract.16 Stated differently, when an act which constitutes a
breach of contract would have itself constituted the source of a quasi-delictual liability had no
contract existed between the parties, the contract can be said to have been breached by tort,
thereby allowing the rules on tort to apply.17

Regrettably for LRT, as well as perhaps the surviving spouse and heirs of the late Nicanor Navidad,
this Court is concluded by the factual finding of the Court of Appeals that "there is nothing to link
(Prudent) to the death of Nicanor (Navidad), for the reason that the negligence of its employee,
Escartin, has not been duly proven x x x." This finding of the appellate court is not without substantial
justification in our own review of the records of the case.

There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of any culpable act
or omission, he must also be absolved from liability. Needless to say, the contractual tie between the
LRT and Navidad is not itself a juridical relation between the latter and Roman; thus, Roman can be
made liable only for his own fault or negligence.

The award of nominal damages in addition to actual damages is untenable. Nominal damages are
adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant,
may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss
suffered by him.18 It is an established rule that nominal damages cannot co-exist with compensatory
damages.19
WHEREFORE, the assailed decision of the appellate court is AFFIRMED with MODIFICATION but
only in that (a) the award of nominal damages is DELETED and (b) petitioner Rodolfo Roman is
absolved from liability. No costs.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio and Azcuna, JJ., concur.

Footnotes

1
Rollo, p. 16.

2
Rollo, pp. 46-47.

3
Rollo, pp. 18-19.

4
Arada vs. Court of Appeals, 210 SCRA 624.

5
Philippine Airlines, Inc. vs. Court of Appeals, 226 SCRA 423.

6
Dangwa Transportation Co., Inc. vs. Court of Appeals, 202 SCRA 575.

7
Article 1763, Civil Code.

8
Gatchalian vs. Delim, 203 SCRA 126; Yobido vs. Court of Appeals, 281 SCRA 1; Landingin
vs. Pangasinan Transportation Co., 33 SCRA 284.

9
Mercado vs. Lira, 3 SCRA 124.

10
Article 1756, Civil Code.

11
Vda. De Abeto vs. Phil. Air Lines, Inc., 30 July 1982.

Art. 2176. Whoever by act or omission causes damage to another, there being fault or
12

negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no
pre-existing contractual relation between the parties, is called a quasi-delict and is governed
by the provisions of this Chapter.

Art. 2180. The obligation imposed by Article 2176 is demandable not only for one’s own
13

acts or omissions, but also for those of persons for whom one is responsible.

The father and, in case of his death or incapacity, the mother, are responsible for the
damages caused by the minor children who live in their company.

Guardians are liable for damages caused by the minors or incapacitated persons
who are under their authority and live in their company.
 The owners and managers of an establishment or enterprise are likewise responsible
for damages caused by their employees in the service of the branches in which the
latter are employed or on the occasion of their functions.

Employers shall be liable for the damages caused by their employees and household
helpers acting within the scope of their assigned tasks, even though the former are
not engaged in any business or industry.

The State is responsible in like manner when it acts through a special agent, but not
when the damage has been caused by the official to whom the task done properly
pertains, in which case what is provided in article 2176 shall be applicable.

Lastly, teachers or heads of establishments of arts and trades shall be liable for
damages caused by their pupils and students or apprentices, so long as they remain
in their custody.

The responsibility treated of in this article shall cease when the persons herein
mentioned prove that they observed all the diligence of a good father of a family to
prevent damage.

Art. 2194. The responsibility of two or more persons who are liable for a quasi-delict is
14

solidary.

15
Air France vs. Carrascoso, 124 Phil. 722.

16
PSBA vs. CA, 205 SCRA 729.

Cangco vs. Manila Railroad, 38 Phil. 768; Manila Railroad vs. Compania Transatlantica, 38
17

Phil. 875.

18
Article 2221, Civil Code.

19
Medina, et al. vs. Cresencia, 99 Phil. 506.
G.R. No. 157917 August 29, 2012

SPOUSES TEODORO1 and NANETTE PERENA, Petitioners,

vs.
SPOUSES TERESITA PHILIPPINE NICOLAS and L. ZARATE, NATIONAL RAILWAYS, and the
COURT OF APPEALS Respondents.

DECISION

BERSAMIN, J.:

The operator of a. school bus service is a common carrier in the eyes of the law. He is bound to
observe extraordinary diligence in the conduct of his business. He is presumed to be negligent when
death occurs to a passenger. His liability may include indemnity for loss of earning capacity even if
the deceased passenger may only be an unemployed high school student at the time of the
accident.

The Case

By petition for review on certiorari, Spouses Teodoro and Nanette Perefia (Perefias) appeal the
adverse decision promulgated on November 13, 2002, by which the Court of Appeals (CA) affirmed
with modification the decision rendered on December 3, 1999 by the Regional Trial Court (RTC),
Branch 260, in Parañaque City that had decreed them jointly and severally liable with Philippine
National Railways (PNR), their co-defendant, to Spouses Nicolas and Teresita Zarate (Zarates) for
the death of their 15-year old son, Aaron John L. Zarate (Aaron), then a high school student of Don
Bosco Technical Institute (Don Bosco).

Antecedents

The Pereñas were engaged in the business of transporting students from their respective residences
in Parañaque City to Don Bosco in Pasong Tamo, Makati City, and back. In their business, the
Pereñas used a KIA Ceres Van (van) with Plate No. PYA 896, which had the capacity to transport 14
students at a time, two of whom would be seated in the front beside the driver, and the others in the
rear, with six students on either side. They employed Clemente Alfaro (Alfaro) as driver of the van.

In June 1996, the Zarates contracted the Pereñas to transport Aaron to and from Don Bosco. On
August 22, 1996, as on previous school days, the van picked Aaron up around 6:00 a.m. from the
Zarates’ residence. Aaron took his place on the left side of the van near the rear door. The van, with
its air-conditioning unit turned on and the stereo playing loudly, ultimately carried all the 14 student
riders on their way to Don Bosco. Considering that the students were due at Don Bosco by 7:15
a.m., and that they were already running late because of the heavy vehicular traffic on the South
Superhighway, Alfaro took the van to an alternate route at about 6:45 a.m. by traversing the narrow
path underneath the Magallanes Interchange that was then commonly used by Makati-bound
vehicles as a short cut into Makati. At the time, the narrow path was marked by piles of construction
materials and parked passenger jeepneys, and the railroad crossing in the narrow path had no
railroad warning signs, or watchmen, or other responsible persons manning the crossing. In fact, the
bamboo barandilla was up, leaving the railroad crossing open to traversing motorists.

At about the time the van was to traverse the railroad crossing, PNR Commuter No. 302 (train),
operated by Jhonny Alano (Alano), was in the vicinity of the Magallanes Interchange travelling
northbound. As the train neared the railroad crossing, Alfaro drove the van eastward across the
railroad tracks, closely tailing a large passenger bus. His view of the oncoming train was blocked
because he overtook the passenger bus on its left side. The train blew its horn to warn motorists of
its approach. When the train was about 50 meters away from the passenger bus and the van, Alano
applied the ordinary brakes of the train. He applied the emergency brakes only when he saw that a
collision was imminent. The passenger bus successfully crossed the railroad tracks, but the van
driven by Alfaro did not. The train hit the rear end of the van, and the impact threw nine of the 12
students in the rear, including Aaron, out of the van. Aaron landed in the path of the train, which
dragged his body and severed his head, instantaneously killing him. Alano fled the scene on board
the train, and did not wait for the police investigator to arrive.

Devastated by the early and unexpected death of Aaron, the Zarates commenced this action for
damages against Alfaro, the Pereñas, PNR and Alano. The Pereñas and PNR filed their respective
answers, with cross-claims against each other, but Alfaro could not be served with summons.

At the pre-trial, the parties stipulated on the facts and issues, viz:

A. FACTS:

(1) That spouses Zarate were the legitimate parents of Aaron John L. Zarate;

(2) Spouses Zarate engaged the services of spouses Pereña for the adequate and
safe transportation carriage of the former spouses' son from their residence in
Parañaque to his school at the Don Bosco Technical Institute in Makati City;

(3) During the effectivity of the contract of carriage and in the implementation
thereof, Aaron, the minor son of spouses Zarate died in connection with a
vehicular/train collision which occurred while Aaron was riding the contracted carrier
Kia Ceres van of spouses Pereña, then driven and operated by the latter's
employee/authorized driver Clemente Alfaro, which van collided with the train of
PNR, at around 6:45 A.M. of August 22, 1996, within the vicinity of the Magallanes
Interchange in Makati City, Metro Manila, Philippines;

(4) At the time of the vehicular/train collision, the subject site of the vehicular/train
collision was a railroad crossing used by motorists for crossing the railroad tracks;

(5) During the said time of the vehicular/train collision, there were no appropriate
and safety warning signs and railings at the site commonly used for railroad crossing;

(6) At the material time, countless number of Makati bound public utility and private
vehicles used on a daily basis the site of the collision as an alternative route and
short-cut to Makati;

(7) The train driver or operator left the scene of the incident on board the commuter
train involved without waiting for the police investigator;

(8) The site commonly used for railroad crossing by motorists was not in fact
intended by the railroad operator for railroad crossing at the time of the vehicular
collision;

(9) PNR received the demand letter of the spouses Zarate;

 (10) PNR refused to acknowledge any liability for the vehicular/train collision;

(11) The eventual closure of the railroad crossing alleged by PNR was an internal
arrangement between the former and its project contractor; and

(12) The site of the vehicular/train collision was within the vicinity or less than 100
meters from the Magallanes station of PNR.

B. ISSUES

(1) Whether or not defendant-driver of the van is, in the performance of his functions,
liable for negligence constituting the proximate cause of the vehicular collision, which
resulted in the death of plaintiff spouses' son;

(2) Whether or not the defendant spouses Pereña being the employer of defendant
Alfaro are liable for any negligence which may be attributed to defendant Alfaro;

(3) Whether or not defendant Philippine National Railways being the operator of the
railroad system is liable for negligence in failing to provide adequate safety warning
signs and railings in the area commonly used by motorists for railroad crossings,
constituting the proximate cause of the vehicular collision which resulted in the death
of the plaintiff spouses' son;

(4) Whether or not defendant spouses Pereña are liable for breach of the contract of
carriage with plaintiff-spouses in failing to provide adequate and safe transportation
for the latter's son;

(5) Whether or not defendants spouses are liable for actual, moral damages,
exemplary damages, and attorney's fees;

(6) Whether or not defendants spouses Teodorico and Nanette Pereña observed the
diligence of employers and school bus operators;

(7) Whether or not defendant-spouses are civilly liable for the accidental death of
Aaron John Zarate;

(8) Whether or not defendant PNR was grossly negligent in operating the commuter
train involved in the accident, in allowing or tolerating the motoring public to cross,
and its failure to install safety devices or equipment at the site of the accident for the
protection of the public;

(9) Whether or not defendant PNR should be made to reimburse defendant spouses
for any and whatever amount the latter may be held answerable or which they may
be ordered to pay in favor of plaintiffs by reason of the action;

(10) Whether or not defendant PNR should pay plaintiffs directly and fully on the
amounts claimed by the latter in their Complaint by reason of its gross negligence;

(11) Whether or not defendant PNR is liable to defendants spouses for actual, moral
and exemplary damages and attorney's fees.2
The Zarates’ claim against the Pereñas was upon breach of the contract of carriage for the safe
transport of Aaron; but that against PNR was based on quasi-delict under Article 2176, Civil Code.

In their defense, the Pereñas adduced evidence to show that they had exercised the diligence of a
good father of the family in the selection and supervision of Alfaro, by making sure that Alfaro had
been issued a driver’s license and had not been involved in any vehicular accident prior to the
collision; that their own son had taken the van daily; and that Teodoro Pereña had sometimes
accompanied Alfaro in the van’s trips transporting the students to school.

For its part, PNR tended to show that the proximate cause of the collision had been the reckless
crossing of the van whose driver had not first stopped, looked and listened; and that the narrow path
traversed by the van had not been intended to be a railroad crossing for motorists.

Ruling of the RTC

On December 3, 1999, the RTC rendered its decision,3 disposing:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and
against the defendants ordering them to jointly and severally pay the plaintiffs as follows:

(1) (for) the death of Aaron- Php50,000.00;

(2) Actual damages in the amount of Php100,000.00;

(3) For the loss of earning capacity- Php2,109,071.00;

(4) Moral damages in the amount of Php4,000,000.00;

(5) Exemplary damages in the amount of Php1,000,000.00;

(6) Attorney’s fees in the amount of Php200,000.00; and

(7) Cost of suit.

SO ORDERED.

On June 29, 2000, the RTC denied the Pereñas’ motion for reconsideration,4 reiterating that the
cooperative gross negligence of the Pereñas and PNR had caused the collision that led to the death
of Aaron; and that the damages awarded to the Zarates were not excessive, but based on the
established circumstances.

The CA’s Ruling

Both the Pereñas and PNR appealed (C.A.-G.R. CV No. 68916).

PNR assigned the following errors, to wit:5

The Court a quo erred in:

 1. In finding the defendant-appellant Philippine National Railways jointly and
severally liable together with defendant-appellants spouses Teodorico and Nanette
Pereña and defendant-appellant Clemente Alfaro to pay plaintiffs-appellees for the
death of Aaron Zarate and damages.

2. In giving full faith and merit to the oral testimonies of plaintiffs-appellees witnesses
despite overwhelming documentary evidence on record, supporting the case of
defendants-appellants Philippine National Railways.

The Pereñas ascribed the following errors to the RTC, namely:

The trial court erred in finding defendants-appellants jointly and severally liable for actual, moral and
exemplary damages and attorney’s fees with the other defendants.

The trial court erred in dismissing the cross-claim of the appellants Pereñas against the Philippine
National Railways and in not holding the latter and its train driver primarily responsible for the
incident.

The trial court erred in awarding excessive damages and attorney’s fees.

The trial court erred in awarding damages in the form of deceased’s loss of earning capacity in the
absence of sufficient basis for such an award.

On November 13, 2002, the CA promulgated its decision, affirming the findings of the RTC, but
limited the moral damages to ₱ 2,500,000.00; and deleted the attorney’s fees because the RTC did
not state the factual and legal bases, to wit:6

WHEREFORE, premises considered, the assailed Decision of the Regional Trial Court, Branch 260
of Parañaque City is AFFIRMED with the modification that the award of Actual Damages is reduced
to ₱ 59,502.76; Moral Damages is reduced to ₱ 2,500,000.00; and the award for Attorney’s Fees is
Deleted.

SO ORDERED.

The CA upheld the award for the loss of Aaron’s earning capacity, taking cognizance of the ruling in
Cariaga v. Laguna Tayabas Bus Company and Manila Railroad Company,7 wherein the Court gave
the heirs of Cariaga a sum representing the loss of the deceased’s earning capacity despite Cariaga
being only a medical student at the time of the fatal incident. Applying the formula adopted in the
American Expectancy Table of Mortality:–

2/3 x (80 - age at the time of death) = life expectancy

the CA determined the life expectancy of Aaron to be 39.3 years upon reckoning his life expectancy
from age of 21 (the age when he would have graduated from college and started working for his own
livelihood) instead of 15 years (his age when he died). Considering that the nature of his work and
his salary at the time of Aaron’s death were unknown, it used the prevailing minimum wage of ₱
280.00/day to compute Aaron’s gross annual salary to be ₱ 110,716.65, inclusive of the thirteenth
month pay. Multiplying this annual salary by Aaron’s life expectancy of 39.3 years, his gross income
would aggregate to ₱ 4,351,164.30, from which his estimated expenses in the sum of ₱
2,189,664.30 was deducted to finally arrive at P 2,161,500.00 as net income. Due to Aaron’s
computed net income turning out to be higher than the amount claimed by the Zarates, only ₱
2,109,071.00, the amount expressly prayed for by them, was granted.

On April 4, 2003, the CA denied the Pereñas’ motion for reconsideration.8

Issues

In this appeal, the Pereñas list the following as the errors committed by the CA, to wit:

I. The lower court erred when it upheld the trial court’s decision holding the petitioners jointly and
severally liable to pay damages with Philippine National Railways and dismissing their cross-claim
against the latter.

II. The lower court erred in affirming the trial court’s decision awarding damages for loss of earning
capacity of a minor who was only a high school student at the time of his death in the absence of
sufficient basis for such an award.

III. The lower court erred in not reducing further the amount of damages awarded, assuming
petitioners are liable at all.

Ruling

The petition has no merit.

1.
Were the Pereñas and PNR jointly
and severally liable for damages?

The Zarates brought this action for recovery of damages against both the Pereñas and the PNR,
basing their claim against the Pereñas on breach of contract of carriage and against the PNR on
quasi-delict.

The RTC found the Pereñas and the PNR negligent. The CA affirmed the findings.

We concur with the CA.

To start with, the Pereñas’ defense was that they exercised the diligence of a good father of the
family in the selection and supervision of Alfaro, the van driver, by seeing to it that Alfaro had a
driver’s license and that he had not been involved in any vehicular accident prior to the fatal collision
with the train; that they even had their own son travel to and from school on a daily basis; and that
Teodoro Pereña himself sometimes accompanied Alfaro in transporting the passengers to and from
school. The RTC gave scant consideration to such defense by regarding such defense as
inappropriate in an action for breach of contract of carriage.

We find no adequate cause to differ from the conclusions of the lower courts that the Pereñas
operated as a common carrier; and that their standard of care was extraordinary diligence, not the
ordinary diligence of a good father of a family.

Although in this jurisdiction the operator of a school bus service has been usually regarded as a
private carrier,9 primarily because he only caters to some specific or privileged individuals, and his
operation is neither open to the indefinite public nor for public use, the exact nature of the operation
of a school bus service has not been finally settled. This is the occasion to lay the matter to rest.

A carrier is a person or corporation who undertakes to transport or convey goods or persons from
one place to another, gratuitously or for hire. The carrier is classified either as a private/special
carrier or as a common/public carrier.10 A private carrier is one who, without making the activity a
vocation, or without holding himself or itself out to the public as ready to act for all who may desire
his or its services, undertakes, by special agreement in a particular instance only, to transport goods
or persons from one place to another either gratuitously or for hire.11 The provisions on ordinary
contracts of the Civil Code govern the contract of private carriage.The diligence required of a private
carrier is only ordinary, that is, the diligence of a good father of the family. In contrast, a common
carrier is a person, corporation, firm or association engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for compensation, offering such
services to the public.12 Contracts of common carriage are governed by the provisions on common
carriers of the Civil Code, the Public Service Act,13 and other special laws relating to transportation. A
common carrier is required to observe extraordinary diligence, and is presumed to be at fault or to
have acted negligently in case of the loss of the effects of passengers, or the death or injuries to
passengers.14

In relation to common carriers, the Court defined public use in the following terms in United States v.
Tan Piaco,15 viz:

"Public use" is the same as "use by the public". The essential feature of the public use is not
confined to privileged individuals, but is open to the indefinite public. It is this indefinite or
unrestricted quality that gives it its public character. In determining whether a use is public, we must
look not only to the character of the business to be done, but also to the proposed mode of doing it.
If the use is merely optional with the owners, or the public benefit is merely incidental, it is not a
public use, authorizing the exercise of the jurisdiction of the public utility commission. There must be,
in general, a right which the law compels the owner to give to the general public. It is not enough that
the general prosperity of the public is promoted. Public use is not synonymous with public interest.
The true criterion by which to judge the character of the use is whether the public may enjoy it by
right or only by permission.

In De Guzman v. Court of Appeals,16 the Court noted that Article 1732 of the Civil Code avoided any
distinction between a person or an enterprise offering transportation on a regular or an isolated
basis; and has not distinguished a carrier offering his services to the general public, that is, the
general community or population, from one offering his services only to a narrow segment of the
general population.

Nonetheless, the concept of a common carrier embodied in Article 1732 of the Civil Code coincides
neatly with the notion of public service under the Public Service Act, which supplements the law on
common carriers found in the Civil Code. Public service, according to Section 13, paragraph (b) of
the Public Service Act, includes:

x x x every person that now or hereafter may own, operate, manage, or control in the Philippines, for
hire or compensation, with general or limited clientèle, whether permanent or occasional, and done
for the general business purposes, any common carrier, railroad, street railway, traction railway,
subway motor vehicle, either for freight or passenger, or both, with or without fixed route and
whatever may be its classification, freight or carrier service of any class, express service, steamboat,
or steamship line, pontines, ferries and water craft, engaged in the transportation of passengers or
freight or both, shipyard, marine repair shop, ice-refrigeration plant, canal, irrigation system, gas,
electric light, heat and power, water supply and power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting stations and other similar public services. x
x x.17

Given the breadth of the aforequoted characterization of a common carrier, the Court has
considered as common carriers pipeline operators,18 custom brokers and warehousemen,19 and barge
operators20 even if they had limited clientèle.

As all the foregoing indicate, the true test for a common carrier is not the quantity or extent of the
business actually transacted, or the number and character of the conveyances used in the activity,
but whether the undertaking is a part of the activity engaged in by the carrier that he has held out to
the general public as his business or occupation. If the undertaking is a single transaction, not a part
of the general business or occupation engaged in, as advertised and held out to the general public,
the individual or the entity rendering such service is a private, not a common, carrier. The question
must be determined by the character of the business actually carried on by the carrier, not by any
secret intention or mental reservation it may entertain or assert when charged with the duties and
obligations that the law imposes.21

Applying these considerations to the case before us, there is no question that the Pereñas as the
operators of a school bus service were: (a) engaged in transporting passengers generally as a
business, not just as a casual occupation; (b) undertaking to carry passengers over established
roads by the method by which the business was conducted; and (c) transporting students for a fee.
Despite catering to a limited clientèle, the Pereñas operated as a common carrier because they held
themselves out as a ready transportation indiscriminately to the students of a particular school living
within or near where they operated the service and for a fee.

The common carrier’s standard of care and vigilance as to the safety of the passengers is defined by
law. Given the nature of the business and for reasons of public policy, the common carrier is bound
"to observe extraordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of each case."22 Article 1755 of
the Civil Code specifies that the common carrier should "carry the passengers safely as far as
human care and foresight can provide, using the utmost diligence of very cautious persons, with a
due regard for all the circumstances." To successfully fend off liability in an action upon the death or
injury to a passenger, the common carrier must prove his or its observance of that extraordinary
diligence; otherwise, the legal presumption that he or it was at fault or acted negligently would
stand.23 No device, whether by stipulation, posting of notices, statements on tickets, or otherwise,
may dispense with or lessen the responsibility of the common carrier as defined under Article 1755
of the Civil Code. 24

And, secondly, the Pereñas have not presented any compelling defense or reason by which the
Court might now reverse the CA’s findings on their liability. On the contrary, an examination of the
records shows that the evidence fully supported the findings of the CA.

As earlier stated, the Pereñas, acting as a common carrier, were already presumed to be negligent
at the time of the accident because death had occurred to their passenger.25 The presumption of
negligence, being a presumption of law, laid the burden of evidence on their shoulders to establish
that they had not been negligent.26 It was the law no less that required them to prove their
observance of extraordinary diligence in seeing to the safe and secure carriage of the passengers to
their destination. Until they did so in a credible manner, they stood to be held legally responsible for
the death of Aaron and thus to be held liable for all the natural consequences of such death.

There is no question that the Pereñas did not overturn the presumption of their negligence by
credible evidence. Their defense of having observed the diligence of a good father of a family in the
selection and supervision of their driver was not legally sufficient. According to Article 1759 of the
Civil Code, their liability as a common carrier did not cease upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their employee. This was the
reason why the RTC treated this defense of the Pereñas as inappropriate in this action for breach of
contract of carriage.

The Pereñas were liable for the death of Aaron despite the fact that their driver might have acted
beyond the scope of his authority or even in violation of the orders of the common carrier.27 In this
connection, the records showed their driver’s actual negligence. There was a showing, to begin with,
that their driver traversed the railroad tracks at a point at which the PNR did not permit motorists
going into the Makati area to cross the railroad tracks. Although that point had been used by
motorists as a shortcut into the Makati area, that fact alone did not excuse their driver into taking that
route. On the other hand, with his familiarity with that shortcut, their driver was fully aware of the
risks to his passengers but he still disregarded the risks. Compounding his lack of care was that loud
music was playing inside the air-conditioned van at the time of the accident. The loudness most
probably reduced his ability to hear the warning horns of the oncoming train to allow him to correctly
appreciate the lurking dangers on the railroad tracks. Also, he sought to overtake a passenger bus
on the left side as both vehicles traversed the railroad tracks. In so doing, he lost his view of the train
that was then coming from the opposite side of the passenger bus, leading him to miscalculate his
chances of beating the bus in their race, and of getting clear of the train. As a result, the bus avoided
a collision with the train but the van got slammed at its rear, causing the fatality. Lastly, he did not
slow down or go to a full stop before traversing the railroad tracks despite knowing that his
slackening of speed and going to a full stop were in observance of the right of way at railroad tracks
as defined by the traffic laws and regulations.28 He thereby violated a specific traffic regulation on
right of way, by virtue of which he was immediately presumed to be negligent.29

The omissions of care on the part of the van driver constituted negligence,30 which, according to
Layugan v. Intermediate Appellate Court,31 is "the omission to do something which a reasonable man,
guided by those considerations which ordinarily regulate the conduct of human affairs, would do, or
the doing of something which a prudent and reasonable man would not do,32 or as Judge Cooley
defines it, ‘(t)he failure to observe for the protection of the interests of another person, that degree of
care, precaution, and vigilance which the circumstances justly demand, whereby such other person
suffers injury.’"33

The test by which to determine the existence of negligence in a particular case has been aptly stated
in the leading case of Picart v. Smith,34 thuswise:

The test by which to determine the existence of negligence in a particular case may be stated as
follows: Did the defendant in doing the alleged negligent act use that reasonable care and caution
which an ordinarily prudent person would have used in the same situation? If not, then he is guilty of
negligence. The law here in effect adopts the standard supposed to be supplied by the imaginary
conduct of the discreet paterfamilias of the Roman law. The existence of negligence in a given case
is not determined by reference to the personal judgment of the actor in the situation before him. The
law considers what would be reckless, blameworthy, or negligent in the man of ordinary intelligence
and prudence and determines liability by that.

The question as to what would constitute the conduct of a prudent man in a given situation must of
course be always determined in the light of human experience and in view of the facts involved in
the particular case. Abstract speculation cannot here be of much value but this much can be
profitably said: Reasonable men govern their conduct by the circumstances which are before them
or known to them. They are not, and are not supposed to be, omniscient of the future. Hence they
can be expected to take care only when there is something before them to suggest or warn of
danger. Could a prudent man, in the case under consideration, foresee harm as a result of the
course actually pursued? If so, it was the duty of the actor to take precautions to guard against that
harm. Reasonable foresight of harm, followed by the ignoring of the suggestion born of this
prevision, is always necessary before negligence can be held to exist. Stated in these terms, the
proper criterion for determining the existence of negligence in a given case is this: Conduct is said to
be negligent when a prudent man in the position of the tortfeasor would have foreseen that an effect
harmful to another was sufficiently probable to warrant his foregoing the conduct or guarding against
its consequences. (Emphasis supplied)

Pursuant to the Picart v. Smith test of negligence, the Pereñas’ driver was entirely negligent when he
traversed the railroad tracks at a point not allowed for a motorist’s crossing despite being fully aware
of the grave harm to be thereby caused to his passengers; and when he disregarded the foresight of
harm to his passengers by overtaking the bus on the left side as to leave himself blind to the
approach of the oncoming train that he knew was on the opposite side of the bus.

Unrelenting, the Pereñas cite Phil. National Railways v. Intermediate Appellate Court,35 where the
Court held the PNR solely liable for the damages caused to a passenger bus and its passengers
when its train hit the rear end of the bus that was then traversing the railroad crossing. But the
circumstances of that case and this one share no similarities. In Philippine National Railways v.
Intermediate Appellate Court, no evidence of contributory negligence was adduced against the
owner of the bus. Instead, it was the owner of the bus who proved the exercise of extraordinary
diligence by preponderant evidence. Also, the records are replete with the showing of negligence on
the part of both the Pereñas and the PNR. Another distinction is that the passenger bus in Philippine
National Railways v. Intermediate Appellate Court was traversing the dedicated railroad crossing
when it was hit by the train, but the Pereñas’ school van traversed the railroad tracks at a point not
intended for that purpose.

At any rate, the lower courts correctly held both the Pereñas and the PNR "jointly and severally"
liable for damages arising from the death of Aaron. They had been impleaded in the same complaint
as defendants against whom the Zarates had the right to relief, whether jointly, severally, or in the
alternative, in respect to or arising out of the accident, and questions of fact and of law were
common as to the Zarates.36 Although the basis of the right to relief of the Zarates (i.e., breach of
contract of carriage) against the Pereñas was distinct from the basis of the Zarates’ right to relief
against the PNR (i.e., quasi-delict under Article 2176, Civil Code), they nonetheless could be held
jointly and severally liable by virtue of their respective negligence combining to cause the death of
Aaron. As to the PNR, the RTC rightly found the PNR also guilty of negligence despite the school
van of the Pereñas traversing the railroad tracks at a point not dedicated by the PNR as a railroad
crossing for pedestrians and motorists, because the PNR did not ensure the safety of others through
the placing of crossbars, signal lights, warning signs, and other permanent safety barriers to prevent
vehicles or pedestrians from crossing there. The RTC observed that the fact that a crossing guard
had been assigned to man that point from 7 a.m. to 5 p.m. was a good indicium that the PNR was
aware of the risks to others as well as the need to control the vehicular and other traffic there. Verily,
the Pereñas and the PNR were joint tortfeasors.

2.
Was the indemnity for loss of
Aaron’s earning capacity proper?

The RTC awarded indemnity for loss of Aaron’s earning capacity. Although agreeing with the RTC
on the liability, the CA modified the amount. Both lower courts took into consideration that Aaron,
while only a high school student, had been enrolled in one of the reputable schools in the Philippines
and that he had been a normal and able-bodied child prior to his death. The basis for the
computation of Aaron’s earning capacity was not what he would have become or what he would
have wanted to be if not for his untimely death, but the minimum wage in effect at the time of his
death. Moreover, the RTC’s computation of Aaron’s life expectancy rate was not reckoned from his
age of 15 years at the time of his death, but on 21 years, his age when he would have graduated
from college.

We find the considerations taken into account by the lower courts to be reasonable and fully
warranted.

Yet, the Pereñas submit that the indemnity for loss of earning capacity was speculative and
unfounded. They cited People v. Teehankee, Jr.,37 where the Court deleted the indemnity for victim
1âwphi1

Jussi Leino’s loss of earning capacity as a pilot for being speculative due to his having graduated
from high school at the International School in Manila only two years before the shooting, and was at
the time of the shooting only enrolled in the first semester at the Manila Aero Club to pursue his
ambition to become a professional pilot. That meant, according to the Court, that he was for all
intents and purposes only a high school graduate.

We reject the Pereñas’ submission.

First of all, a careful perusal of the Teehankee, Jr. case shows that the situation there of Jussi Leino
was not akin to that of Aaron here. The CA and the RTC were not speculating that Aaron would be
some highly-paid professional, like a pilot (or, for that matter, an engineer, a physician, or a lawyer).
Instead, the computation of Aaron’s earning capacity was premised on him being a lowly minimum
wage earner despite his being then enrolled at a prestigious high school like Don Bosco in Makati, a
fact that would have likely ensured his success in his later years in life and at work.

And, secondly, the fact that Aaron was then without a history of earnings should not be taken against
his parents and in favor of the defendants whose negligence not only cost Aaron his life and his right
to work and earn money, but also deprived his parents of their right to his presence and his services
as well. Our law itself states that the loss of the earning capacity of the deceased shall be the liability
of the guilty party in favor of the heirs of the deceased, and shall in every case be assessed and
awarded by the court "unless the deceased on account of permanent physical disability not caused
by the defendant, had no earning capacity at the time of his death."38 Accordingly, we emphatically
hold in favor of the indemnification for Aaron’s loss of earning capacity despite him having been
unemployed, because compensation of this nature is awarded not for loss of time or earnings but for
loss of the deceased’s power or ability to earn money.39

This favorable treatment of the Zarates’ claim is not unprecedented. In Cariaga v. Laguna Tayabas
Bus Company and Manila Railroad Company,40 fourth-year medical student Edgardo Carriaga’s
earning capacity, although he survived the accident but his injuries rendered him permanently
incapacitated, was computed to be that of the physician that he dreamed to become. The Court
considered his scholastic record sufficient to justify the assumption that he could have finished the
medical course and would have passed the medical board examinations in due time, and that he
could have possibly earned a modest income as a medical practitioner. Also, in People v.
Sanchez,41 the Court opined that murder and rape victim Eileen Sarmienta and murder victim Allan
Gomez could have easily landed good-paying jobs had they graduated in due time, and that their
jobs would probably pay them high monthly salaries from ₱ 10,000.00 to ₱ 15,000.00 upon their
graduation. Their earning capacities were computed at rates higher than the minimum wage at the
time of their deaths due to their being already senior agriculture students of the University of the
Philippines in Los Baños, the country’s leading educational institution in agriculture.
 3.
Were the amounts of damages excessive?

The Pereñas plead for the reduction of the moral and exemplary damages awarded to the Zarates in
the respective amounts of ₱ 2,500,000.00 and ₱ 1,000,000.00 on the ground that such amounts
were excessive.

The plea is unwarranted.

The moral damages of ₱ 2,500,000.00 were really just and reasonable under the established
circumstances of this case because they were intended by the law to assuage the Zarates’ deep
mental anguish over their son’s unexpected and violent death, and their moral shock over the
senseless accident. That amount would not be too much, considering that it would help the Zarates
obtain the means, diversions or amusements that would alleviate their suffering for the loss of their
child. At any rate, reducing the amount as excessive might prove to be an injustice, given the
passage of a long time from when their mental anguish was inflicted on them on August 22, 1996.

Anent the ₱ 1,000,000.00 allowed as exemplary damages, we should not reduce the amount if only
to render effective the desired example for the public good. As a common carrier, the Pereñas
needed to be vigorously reminded to observe their duty to exercise extraordinary diligence to
prevent a similarly senseless accident from happening again. Only by an award of exemplary
damages in that amount would suffice to instill in them and others similarly situated like them the
ever-present need for greater and constant vigilance in the conduct of a business imbued with public
interest.

WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the decision promulgated on
November 13, 2002; and ORDER the petitioners to pay the costs of suit.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice

WE CONCUR:

MARIA LOURDES P. A. SERENO

Chief Justice

TERESITA J. LEONARDO-DE CASTRO MARTIN S. VILLARAMA, JR.

Associate Justice Associate Justice

BIENVENIDO L. REYES
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Court's Division.
MARIA LOURDES P. A. SERENO
Chief Justice

Footnotes

1
In the title of the case, the petitioner's name appears as Teodoro Perefia, but he signed his
name as Teodorico Perefia in the verification/certification of the petition for review
on certiorari.

2
CA Rollo, pp. 47-49.

3
Id. at 47-55.

4
Id. at 142.

5
Id. at 25-46.

6
Rollo, pp. 70-80.

7
110 Phil. 346 (1960).

8
Id. at 82.

9
Agbayani, Commentaries and Jurisprudence on the Commercial Laws of the Philippines,
1993 Edition, at p. 7.

10
Id. at 4.

11
Perez, Transportation Laws and Public Service Act, 2001 Edition, p. 6.

12
Article 1732 of the Civil Code states:

Article 1732. Common carriers are persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or goods or both, by land, water, or air,
for compensation, offering their services to the public.

Commonwealth Act No. 146, as amended, particularly by PD No. 1, Integrated

13

Reorganization Plan and E.O. 546.

14
Article 1756 of the Civil Code reads:

Article 1756. In case of death of or injuries to passengers, common carriers are presumed to
have been at fault or to have acted negligently, unless they prove that they observed
extraordinary diligence as prescribed in articles 1733 and 1755.

15
40 Phil 853, 856 (1920).
16
G.R. No. L-47822, December 22, 1988, 168 SCRA 612, 617-618.

17
Public Service Act.

First Philippine Industrial Corporation v. Court of Appeals, G.R. No. 125948, December 29,
18

1998, 300 SCRA 661, 670.

Calvo v. UCPB General Insurance Co., G.R. No. 148496, March 19, 2002, 379 SCRA 510,
19

516.

Asia Lighterage and Shipping, Inc. v. Court of Appeals, G.R. No. 147246, August 9, 2003,
20

409 SCRA 340.

21
Agbayani, supra, note 9, pp. 7-8.

22
Article 1733, Civil Code.

23
Article 1756, Civil Code.

24
Article 1757, Civil Code.

25
Supra, note 13.

31A CJS, Evidence §134, citing State Tax Commission v. Phelps Dodge Corporation, 157
26

P. 2d 693, 62 Ariz. 320; Kott v. Hilton, 114 P. 2d 666, 45 C.A. 2d 548; Lindley v. Mowell, Civ.
Ap. 232 S.W. 2d 256.

27
Article 1759, Civil Code.

E.g., Section 42(d) of Republic Act No. 4136 (Land Transportation and Traffic Code), which
28

pertinently provides:

Section 42. Right of way. — xxx

xxx

(d) The driver of a vehicle upon a highway shall bring to a full stop such vehicle
before traversing any "through highway" or railroad crossing: provided, that when it is
apparent that no hazard exists, the vehicle may be slowed down to five miles per
hour instead of bringing it to a full stop.

29
Article 2185 of the Civil Code provides:

Article 2185. Unless there is proof to the contrary, it is presumed that a person
driving a motor vehicle has been negligent if at the time of the mishap, he was
violating any traffic regulation. (n)

See also BLT Bus Company v. Intermediate Appellate Court, No. L-74387-90,
November 14, 1988, 167 SCRA 379.
30
Yamada v. Manila Railroad Co., No. 10073, 33 Phil. 8, 11 (1915).

31
G.R. No. L-73998, November 14, 1988, 167 SCRA 363.

32
Citing Black Law Dictionary, Fifth Edition, p. 930.

33
Citing Cooley on Torts, Fourth Edition, Volume 3, p. 265.

34
37 Phil 809 (1918).

35
G.R. No. 70547, January 22, 1993, 217 SCRA 401.

36
The rule on permissive joinder of parties is Section 6, Rule 3, of the Rules of Court, to wit:

Section 6. Permissive joinder of parties. — All persons in whom or against whom any
right to relief in respect to or arising out of the same transaction or series of
transactions is alleged to exist, whether jointly, severally, or in the alternative, may,
except as otherwise provided in these Rules, join as plaintiffs or be joined as
defendants in one complaint, where any question of law or fact common to all such
plaintiffs or to all such defendants may arise in the action; but the court may make
such orders as may be just to prevent any plaintiff or defendant from being
embarrassed or put to expense in connection with any proceedings in which he may
have no interest. (6)

37
G.R. Nos. 111206-08, October 6, 1995, 249 SCRA 54.

38
Article 2206 (1), Civil Code.

39
People v. Teehankee, Jr., supra, note 37, at 207. See also 25 CJS, Damages, §40.

40
110 Phil 346 (1960).

41
G.R. Nos. 121039-121045, October 18, 2001, 367 SCRA 520.
G.R. No. 186312 June 29, 2010

SPOUSES DANTE CRUZ and LEONORA CRUZ, Petitioners,

vs.
SUN HOLIDAYS, INC., Respondent.

DECISION

CARPIO MORALES, J.:

Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25, 20011 against
Sun Holidays, Inc. (respondent) with the Regional Trial Court (RTC) of Pasig City for damages
arising from the death of their son Ruelito C. Cruz (Ruelito) who perished with his wife on September
11, 2000 on board the boat M/B Coco Beach III that capsized en route to Batangas from Puerto
Galera, Oriental Mindoro where the couple had stayed at Coco Beach Island Resort (Resort) owned
and operated by respondent.

The stay of the newly wed Ruelito and his wife at the Resort from September 9 to 11, 2000 was by
virtue of a tour package-contract with respondent that included transportation to and from the Resort
and the point of departure in Batangas.

Miguel C. Matute (Matute),2 a scuba diving instructor and one of the survivors, gave his account of
the incident that led to the filing of the complaint as follows:

Matute stayed at the Resort from September 8 to 11, 2000. He was originally scheduled to leave the
Resort in the afternoon of September 10, 2000, but was advised to stay for another night because of
strong winds and heavy rains.

On September 11, 2000, as it was still windy, Matute and 25 other Resort guests including
petitioners’ son and his wife trekked to the other side of the Coco Beach mountain that was
sheltered from the wind where they boarded M/B Coco Beach III, which was to ferry them to
Batangas.

Shortly after the boat sailed, it started to rain. As it moved farther away from Puerto Galera and into
the open seas, the rain and wind got stronger, causing the boat to tilt from side to side and the
captain to step forward to the front, leaving the wheel to one of the crew members.

The waves got more unwieldy. After getting hit by two big waves which came one after the other,
M/B Coco Beach III capsized putting all passengers underwater.

The passengers, who had put on their life jackets, struggled to get out of the boat. Upon seeing the
captain, Matute and the other passengers who reached the surface asked him what they could do to
save the people who were still trapped under the boat. The captain replied "Iligtas niyo na lang ang
sarili niyo" (Just save yourselves).

Help came after about 45 minutes when two boats owned by Asia Divers in Sabang, Puerto Galera
passed by the capsized M/B Coco Beach III. Boarded on those two boats were 22 persons,
consisting of 18 passengers and four crew members, who were brought to Pisa Island. Eight
passengers, including petitioners’ son and his wife, died during the incident.
At the time of Ruelito’s death, he was 28 years old and employed as a contractual worker for Mitsui
Engineering & Shipbuilding Arabia, Ltd. in Saudi Arabia, with a basic monthly salary of $900.3

Petitioners, by letter of October 26, 2000,4 demanded indemnification from respondent for the death
of their son in the amount of at least ₱4,000,000.

Replying, respondent, by letter dated November 7, 2000,5 denied any responsibility for the incident
which it considered to be a fortuitous event. It nevertheless offered, as an act of commiseration, the
amount of ₱10,000 to petitioners upon their signing of a waiver.

As petitioners declined respondent’s offer, they filed the Complaint, as earlier reflected, alleging that
respondent, as a common carrier, was guilty of negligence in allowing M/B Coco Beach III to sail
notwithstanding storm warning bulletins issued by the Philippine Atmospheric, Geophysical and
Astronomical Services Administration (PAGASA) as early as 5:00 a.m. of September 11, 2000.6

In its Answer,7 respondent denied being a common carrier, alleging that its boats are not available to
the general public as they only ferry Resort guests and crew members. Nonetheless, it claimed that
it exercised the utmost diligence in ensuring the safety of its passengers; contrary to petitioners’
allegation, there was no storm on September 11, 2000 as the Coast Guard in fact cleared the
voyage; and M/B Coco Beach III was not filled to capacity and had sufficient life jackets for its
passengers. By way of Counterclaim, respondent alleged that it is entitled to an award for attorney’s
fees and litigation expenses amounting to not less than ₱300,000.

Carlos Bonquin, captain of M/B Coco Beach III, averred that the Resort customarily requires four
conditions to be met before a boat is allowed to sail, to wit: (1) the sea is calm, (2) there is clearance
from the Coast Guard, (3) there is clearance from the captain and (4) there is clearance from the
Resort’s assistant manager.8 He added that M/B Coco Beach III met all four conditions on
September 11, 2000,9 but a subasco or squall, characterized by strong winds and big waves,
suddenly occurred, causing the boat to capsize.10

By Decision of February 16, 2005,11 Branch 267 of the Pasig RTC dismissed petitioners’ Complaint
and respondent’s Counterclaim.

Petitioners’ Motion for Reconsideration having been denied by Order dated September 2,
2005,12 they appealed to the Court of Appeals.

By Decision of August 19, 2008,13 the appellate court denied petitioners’ appeal, holding, among
other things, that the trial court correctly ruled that respondent is a private carrier which is only
required to observe ordinary diligence; that respondent in fact observed extraordinary diligence in
transporting its guests on board M/B Coco Beach III; and that the proximate cause of the incident
was a squall, a fortuitous event.

Petitioners’ Motion for Reconsideration having been denied by Resolution dated January 16,
2009,14 they filed the present Petition for Review.15

Petitioners maintain the position they took before the trial court, adding that respondent is a common
carrier since by its tour package, the transporting of its guests is an integral part of its resort
business. They inform that another division of the appellate court in fact held respondent liable for
damages to the other survivors of the incident.
Upon the other hand, respondent contends that petitioners failed to present evidence to prove that it
is a common carrier; that the Resort’s ferry services for guests cannot be considered as ancillary to
its business as no income is derived therefrom; that it exercised extraordinary diligence as shown by
the conditions it had imposed before allowing M/B Coco Beach III to sail; that the incident was
caused by a fortuitous event without any contributory negligence on its part; and that the other case
wherein the appellate court held it liable for damages involved different plaintiffs, issues and
evidence.16

The petition is impressed with merit.

Petitioners correctly rely on De Guzman v. Court of Appeals17 in characterizing respondent as a

common carrier.

The Civil Code defines "common carriers" in the following terms:

Article 1732. Common carriers are persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air for
compensation, offering their services to the public.

The above article makes no distinction between one whose principal business activity is the carrying
of persons or goods or both, and one who does such carrying only as an ancillary activity (in local
idiom, as "a sideline"). Article 1732 also carefully avoids making any distinction between a person or
enterprise offering transportation service on a regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish
between a carrier offering its services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from a narrow segment of the
general population. We think that Article 1733 deliberately refrained from making such distinctions.

So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly
with the notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as
amended) which at least partially supplements the law on common carriers set forth in the Civil
Code. Under Section 13, paragraph (b) of the Public Service Act, "public service" includes:

. . . every person that now or hereafter may own, operate, manage, or control in the Philippines, for
hire or compensation, with general or limited clientele, whether permanent, occasional or accidental,
and done for general business purposes, any common carrier, railroad, street railway, traction
railway, subway motor vehicle, either for freight or passenger, or both, with or without fixed route and
whatever may be its classification, freight or carrier service of any class, express service, steamboat,
or steamship line, pontines, ferries and water craft, engaged in the transportation of passengers or
freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal,
irrigation system, gas, electric light, heat and power, water supply and power petroleum, sewerage
system, wire or wireless communications systems, wire or wireless broadcasting stations and other
similar public services . . .18 (emphasis and underscoring supplied.)

Indeed, respondent is a common carrier. Its ferry services are so intertwined with its main business
as to be properly considered ancillary thereto. The constancy of respondent’s ferry services in its
resort operations is underscored by its having its own Coco Beach boats. And the tour packages it
offers, which include the ferry services, may be availed of by anyone who can afford to pay the
same. These services are thus available to the public.

That respondent does not charge a separate fee or fare for its ferry services is of no moment. It
would be imprudent to suppose that it provides said services at a loss. The Court is aware of the
practice of beach resort operators offering tour packages to factor the transportation fee in arriving at
the tour package price. That guests who opt not to avail of respondent’s ferry services pay the same
amount is likewise inconsequential. These guests may only be deemed to have overpaid.

As De Guzman instructs, Article 1732 of the Civil Code defining "common carriers" has deliberately
refrained from making distinctions on whether the carrying of persons or goods is the carrier’s
principal business, whether it is offered on a regular basis, or whether it is offered to the general
public. The intent of the law is thus to not consider such distinctions. Otherwise, there is no telling
how many other distinctions may be concocted by unscrupulous businessmen engaged in the
carrying of persons or goods in order to avoid the legal obligations and liabilities of common carriers.

Under the Civil Code, common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence for the safety of the passengers transported by
them, according to all the circumstances of each case.19 They are bound to carry the passengers
safely as far as human care and foresight can provide, using the utmost diligence of very cautious
persons, with due regard for all the circumstances.20

When a passenger dies or is injured in the discharge of a contract of carriage, it is presumed that the
common carrier is at fault or negligent. In fact, there is even no need for the court to make an
express finding of fault or negligence on the part of the common carrier. This statutory presumption
may only be overcome by evidence that the carrier exercised extraordinary diligence.21

Respondent nevertheless harps on its strict compliance with the earlier mentioned conditions of
voyage before it allowed M/B Coco Beach III to sail on September 11, 2000. Respondent’s position
does not impress.

The evidence shows that PAGASA issued 24-hour public weather forecasts and tropical cyclone
warnings for shipping on September 10 and 11, 2000 advising of tropical depressions in Northern
Luzon which would also affect the province of Mindoro.22 By the testimony of Dr. Frisco Nilo,
supervising weather specialist of PAGASA, squalls are to be expected under such weather
condition.23

A very cautious person exercising the utmost diligence would thus not brave such stormy weather
and put other people’s lives at risk. The extraordinary diligence required of common carriers
demands that they take care of the goods or lives entrusted to their hands as if they were their own.
This respondent failed to do.

Respondent’s insistence that the incident was caused by a fortuitous event does not impress either.

The elements of a "fortuitous event" are: (a) the cause of the unforeseen and unexpected
occurrence, or the failure of the debtors to comply with their obligations, must have been
independent of human will; (b) the event that constituted the caso fortuito must have been
impossible to foresee or, if foreseeable, impossible to avoid; (c) the occurrence must have been
such as to render it impossible for the debtors to fulfill their obligation in a normal manner; and (d)
the obligor must have been free from any participation in the aggravation of the resulting injury to the
creditor.24

To fully free a common carrier from any liability, the fortuitous event must have been the proximate
and only cause of the loss. And it should have exercised due diligence to prevent or minimize the
loss before, during and after the occurrence of the fortuitous event.25
Respondent cites the squall that occurred during the voyage as the fortuitous event that overturned
M/B Coco Beach III. As reflected above, however, the occurrence of squalls was expected under the
weather condition of September 11, 2000. Moreover, evidence shows that M/B Coco Beach III
suffered engine trouble before it capsized and sank.26 The incident was, therefore, not completely
free from human intervention.

The Court need not belabor how respondent’s evidence likewise fails to demonstrate that it
exercised due diligence to prevent or minimize the loss before, during and after the occurrence of
the squall.

Article 176427 vis-à-vis Article 220628 of the Civil Code holds the common carrier in breach of its
contract of carriage that results in the death of a passenger liable to pay the following: (1) indemnity
for death, (2) indemnity for loss of earning capacity and (3) moral damages.

Petitioners are entitled to indemnity for the death of Ruelito which is fixed at ₱50,000.29

As for damages representing unearned income, the formula for its computation is:

Net Earning Capacity = life expectancy x (gross annual income - reasonable and necessary living
expenses).

Life expectancy is determined in accordance with the formula:

2 / 3 x [80 — age of deceased at the time of death]30

The first factor, i.e., life expectancy, is computed by applying the formula (2/3 x [80 — age at death])
adopted in the American Expectancy Table of Mortality or the Actuarial of Combined Experience
Table of Mortality.31

The second factor is computed by multiplying the life expectancy by the net earnings of the
deceased, i.e., the total earnings less expenses necessary in the creation of such earnings or
income and less living and other incidental expenses.32 The loss is not equivalent to the entire
earnings of the deceased, but only such portion as he would have used to support his dependents or
heirs. Hence, to be deducted from his gross earnings are the necessary expenses supposed to be
used by the deceased for his own needs.33

In computing the third factor – necessary living expense, Smith Bell Dodwell Shipping Agency Corp.
v. Borja34 teaches that when, as in this case, there is no showing that the living expenses constituted
the smaller percentage of the gross income, the living expenses are fixed at half of the gross
income.

Applying the above guidelines, the Court determines Ruelito's life expectancy as follows:

Life expectancy = 2/3 x [80 - age of deceased at the time of death]

2/3 x [80 - 28]
2/3 x [52]

Life expectancy = 35
Documentary evidence shows that Ruelito was earning a basic monthly salary of $90035 which, when
converted to Philippine peso applying the annual average exchange rate of $1 = ₱44 in
2000,36 amounts to ₱39,600. Ruelito’s net earning capacity is thus computed as follows:

Net Earning = life expectancy x (gross annual income - reasonable and necessary
Capacity living expenses).
= 35 x (₱475,200 - ₱237,600)
= 35 x (₱237,600)

Net Earning
= ₱8,316,000
Capacity

Respecting the award of moral damages, since respondent common carrier’s breach of contract of
carriage resulted in the death of petitioners’ son, following Article 1764 vis-à-vis Article 2206 of the
Civil Code, petitioners are entitled to moral damages.

Since respondent failed to prove that it exercised the extraordinary diligence required of common
carriers, it is presumed to have acted recklessly, thus warranting the award too of exemplary
damages, which are granted in contractual obligations if the defendant acted in a wanton, fraudulent,
reckless, oppressive or malevolent manner.37

Under the circumstances, it is reasonable to award petitioners the amount of ₱100,000 as moral
damages and ₱100,000 as exemplary damages.38 1avvphi1

Pursuant to Article 220839 of the Civil Code, attorney's fees may also be awarded where exemplary
damages are awarded. The Court finds that 10% of the total amount adjudged against respondent is
reasonable for the purpose.

Finally, Eastern Shipping Lines, Inc. v. Court of Appeals40 teaches that when an obligation,
regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the
contravenor can be held liable for payment of interest in the concept of actual and compensatory
damages, subject to the following rules, to wit —

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a
loan or forbearance of money, the interest due should be that which may have been
stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time
it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per
annum to be computed from default, i.e., from judicial or extrajudicial demand under and
subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an

interest on the amount of damages awarded may be imposed at the discretion of the court at
the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or
damages except when or until the demand can be established with reasonable certainty.
Accordingly, where the demand is established with reasonable certainty, the interest shall
begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code)
but when such certainty cannot be so reasonably established at the time the demand is
made, the interest shall begin to run only from the date the judgment of the court is made (at
which time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any case, be on
the amount finally adjudged.
 3. When the judgment of the court awarding a sum of money becomes final and executory,
the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above,
shall be 12% per annum from such finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of credit. (emphasis supplied).

Since the amounts payable by respondent have been determined with certainty only in the present
petition, the interest due shall be computed upon the finality of this decision at the rate of 12% per
annum until satisfaction, in accordance with paragraph number 3 of the immediately cited guideline
in Easter Shipping Lines, Inc.

WHEREFORE, the Court of Appeals Decision of August 19, 2008 is REVERSED and SET ASIDE.
Judgment is rendered in favor of petitioners ordering respondent to pay petitioners the following: (1)
₱50,000 as indemnity for the death of Ruelito Cruz; (2) ₱8,316,000 as indemnity for Ruelito’s loss of
earning capacity; (3) ₱100,000 as moral damages; (4) ₱100,000 as exemplary damages; (5) 10% of
the total amount adjudged against respondent as attorneys fees; and (6) the costs of suit.

The total amount adjudged against respondent shall earn interest at the rate of 12% per annum
computed from the finality of this decision until full payment.

SO ORDERED.

CONCHITA CARPIO MORALES

Associate Justice
Chairperson

WE CONCUR:

ARTURO D. BRION LUCAS P. BERSAMIN

Associate Justice Associate Justice

ROBERTO A. ABAD MARTIN S. VILLARAMA, JR.

Associate Justice Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above
decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Court’s Division.

RENATO C. CORONA
Chief Justice

Footnotes

* Additional member per Special Order No. 843 dated May 17, 2010.
1 Records, pp. 2-6.

2 TSN of September 12, 2002, pp. 2-22.

3 Vide TSN of May 2, 2002, pp. 5-7; records, p. 4.

4 Records, pp. 19-20.

5 Id. at 21-22.

6 Vide Complaint, supra note 1.

7 Records, pp. 28-35.

8 Vide TSN of February 4, 2003, pp. 6-7.

9 Id. at 8.

10 TSN of March 4, 2003, pp. 5-6.

11 Records, pp. 488-496.

12 Id. at 581-585.

13Penned by Associate Justice Normandie B. Pizarro, with the concurrence of Associate

Justices Edgardo P. Cruz and Fernanda Lampas Peralta; CA rollo, pp. 135-147.

14 Id. at 190-191.

15 Rollo, pp. 18-31.

16 Vide Comment, id. at 60-81.

17 G.R. No. L-47822, December 22, 1988,168 SCRA 612.

18 Id. at 617-618.

19 Civil Code, Art. 1733.

20 Id., Art. 1755.

21 Diaz v. Court of Appeals, G.R. No. 149749, July 25, 2006, 496 SCRA 468, 472.

22 Vide records, pp. 268-276.

23 Vide TSN of December 13, 2001, pp. 3-19.

24Lea Mer Industries, Inc. v. Malayan Insurance Co., Inc., G.R. No. 161745, September 30,
2005, 471 SCRA 698, 707-708.
25 Ibid.

26 Records, pp. 279-280.

27Art. 1764. Damages in cases comprised in this Section shall be awarded in accordance
with Title XVIII of this Book concerning Damages. Article 2206 shall also apply to the death
of a passenger caused by the breach of contract by a common carrier.

28Art. 2206. The amount of damages for death caused by a crime or quasi-delict shall be at
least three thousand pesos, even though there may have been mitigating circumstances. In
addition:

(1) The defendant shall be liable for the loss of the earning capacity of the deceased,
and the indemnity shall be paid to the heirs of the latter; such indemnity shall in every
case be assessed and awarded by the court, unless the deceased on account of
permanent physical disability not caused by the defendant, had no earning capacity
at the time of his death;

(2) If the deceased was obliged to give support according to the provisions of article
291, the recipient who is not an heir called to the decedent's inheritance by the law of
testate or intestate succession, may demand support from the person causing the
death, for a period not exceeding five years, the exact duration to be fixed by the
court;

(3) The spouse, legitimate and illegitimate descendants and ascendants of the
deceased may demand moral damages for mental anguish by reason of the death of
the deceased.

29 Tiu v. Arriesgado, G.R. No. 138060, September 1, 2004, 437 SCRA 426, 451-452.

30Candano Shipping Lines, Inc. v. Sugata-on, G.R. No. 163212, March 13, 2007, 578 SCRA
221, 235.

31Lambert v. Heirs of Ray Castillon, G.R. No. 160709, February 23, 2005, 452 SCRA 285,
294.

32 Ibid.

33 Magbanua v. Tabusares, Jr., G.R. No. 152134, June 4, 2004, 431 SCRA 99, 104.

34 G.R. No. 143008, June 10, 2002, 383 SCRA 341, 351.

35 Vide records, pp. 258-259.

For reference, vide Bangko Sentral ng Pilipinas Treasury Department Reference

36

Exchange Rate Bulletins at www.bsp.gov.ph/dbank_reports/ExchangeRates.

37 Vide Yobido v. Court of Appeals, 346 Phil. 1, 13 (1997).

38Vide Victory Liner, Inc. v. Gammad, G.R. No. 159636, November 25, 2004, 444 SCRA
355, 370.
39Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other
than judicial costs, cannot be recovered, except:

(1) When exemplary damages are awarded;

40 G.R. No. 97412, July 12, 1994, 234 SCRA 78, 95–97.